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NATIONAL    BANK, 


OR 


AN  APPEAL  TO  THE 


COMMON  SENSE  OF  THE  PEOPLE  OF  THE 


UNITED    STATES: 


ESPECIALLY  OF  THE 


LABORING    CLASSES. 


BY   JOHN   R.    KURD. 


"  Where  no  ox  is,  the  crib  is  clean  ;  but  much  increase  is  by  the  strength  of  the  ox." 


NEW  YORK  I 

PUBLISHED  BY  W.  E.  DEAN,  2  ANN  STREET 
1  84.2. 


f 


INTRODUCTORY  ADDRESS. 


FELLOW  CITIZENS  : — 

You  are  aware  that  there  is  a  difference  of  opinion  amongst  the  people 
of  the  United  States,  on  the  subject  of  the  Banking  System  of  this  country 
generally,  and  especially  upon  the  subject  of  a  NATIONAL  BANK. 

This  difference  of  opinion  has  been  made  at  times  a  matter  of  party 
distinction.  Each  of  the  two  political  parties,  into  which  the  country  is 
frequently  divided,  taking  opposite  sides:  one  for,  and  the  other  against 
Banks,  and  one  for,  and  the  other  against  a  National  Bank.  In  this  way 
the  real  subject  of  enquiry  has  been  lost  sight,  of.  The  question  with  both 
sides,  having  been  more  to  know  what  will  favor  this  or  that  party,  than 
to  know  whether  Banks  are  good  in  themselves,  or  not ;  or  whether  a  Na- 
tional Bank  be  a  benefit  to  the  country  or  not. 

It  needs  but  a  moment's  consideration,  however,  to  convince  any  one 
that,  aside  from  all  party  views  whatever,  and  even  on  the  supposition, 
that  there  were  no  political  parties  in  existence,  it  a  matter  of  very  oreat 
importance,  to  know  whether  Banks,  such  as  our  State  Banks  are,  should 
be  sustained  or  not : — whether  they  are  a  good,  or  an  evil — whether,  if  a 
good,  they  require  restraint,  or  regulation,  and  if  they  do  require  it,  what 
kind  of  restraint  this  should  be.  So  also  to  know  whether  a  National 
Bank,  such  as  we  have  had  in  the  country,  be  useful  or  not ;  and  if  useful, 
how  and  for  what  reasons  it  is  so. 

No  matter  what  political  party  be  in  power,  or  who  may  be  at.  the  head 
of  the  government,  these  are  subjects  to  be  treated  upon  their  own  merits. 
The  interests  of  party  is  not  to  be.  taken  into  consideration  in  coming  to 
a  decision  as  to  the  expediency  of  these  institutions.  It  is  a  case  like  that 
of  a  question  of  war  or  peace,  you  will  readily  admit  that  we  should  not 
declare  war  against  another  nation,  merely  because  it  would  benefit  this, 
or  that  party  at  home,  you  would  say,  that  such  a  subject  should  be  looked 
at  separately,  and  that  we  should  decide  as  the  permanent  well  being  of 
the  whole  nation  might  seem  to  require. 

My  object  is  to  prevail  upon  you  to  take  up  the  subject  of  Banks,  and 
of  a  National  Bank  in  this  way.  To  allow  if  to  stand  upon  its  own 
merits.  To  discuss  it,  and  to  decide  upon  it,  as  a  matter  of  importance 
to  the  whole  body  of  the  nation,  and  especially  the  great  mass  of  the 
people,  the  LABORING  CLASSES. 

The  moment  is  favorable.  There  are  no  important  elections  now  pend- 
ing :  and  if  there  were,  this  is  a  subject  about  which  persons  of  the  same 
political  party,  may  reasonably  be  allowed  to  differ  in  opinion.  It  is  a 
subject,  too,  not  of  importance  merely  for  the  present  moment,  or  for  the 
present  generation  ;  but  it  is  one,  which  will  continue  to  be  of  import- 
ance for  years  to  come.  It  is  of  importance  not  merely  for  you,  but  it 
will  be  of  the  same  importance  for  your  children,  and  for  your  children's 
children. 

You  have  heard  repeated   declarations  that  Banks  are  evils  ;  and  that 

M128563 


a  National  Bank  particularly,  is  a  great  evil,  and,  on  the  other  hand,  you 
have  heard  as  positive  declarations  that  Banks  are  benefits,  and  that  a  Na- 
tional Bank  is  a  great  benefit ;  but  no  one  has  distinctly  shown  you  in 
what  respect  Banks  are  an  evil,  or  what  classes  of  persons  suffer  by  them  ; 
or  to  whom  a  National  Bank  is  a  great  evil,  or  what  portion  of  the  commu- 
nity may  have  reason  to  object  to  its  operations. 

On  the  other  hand  again,  no  one  has  shown  you  how  Banks  are  bene- 
ficial to  the  people :  in  what  respect  they  are  a  good,  or  under  what  cir- 
cumstances of  restraint  they  are  beneficial  ;  neither  has  any  one  as  dis- 
tinctly shown  you  how,  or  why,  a  National  Bank  is  desirable  for  the  gene- 
ral welfare  ;  however  it  may  interfere  with  the  operations  of  comparative- 
ly a  very  small  number  of  individuals. 

My  purpose  is  to  prevail  upon  you  to  enter  with  me  into  an  examination 
of  these  particulars.  To  enquire  in  what  manner  Banks  generally  are 
advantageous  to  the  nation  ;  what  evils  attend  their  establishment ;  how 
these  evils  may  be  remedied  ;  and  what  class  of  persons  may  be  incom- 
moded by  their  operations.  To  enquire,  also,  in  what  manner  a  National 
Bank  is,  or  may  be,  advantageous  to  the  country,  what  objections  may  be 
made  to  such  a  Bank.  By  whom  these  objections  may  be  made,  and 
what  the  mass  of  the  people  has  to  do  with  the  reasons  of  these  objec- 
tions. To  enquire,  in  fine,  whether  the  interest  of  the  working  classes  has 
been  consulted  at  all,  in  the  hostility  so  frequently  exhibited  towards  a 
National  Bank,  and  indeed,  to  all  Banks  :  and,  if  this  hostility  be  not 
founded  in  any  regard  for  the  welfare  of  the  people,  to  enquire  how  it  is 
that  public  opinion  has  been,  in  certain  respects,  so  much  misled  upon  the 
subject. 

In  pursuing  this  investigation,  we  may  be  obliged  to  enter  more  fully 
into  the  examination  of  some  particulars,  than  is  necessary  for  the  under- 
standing of  persons  familiar  with  matters  of  this  kind  ;  but  as  there  are 
many  to  whom  the  subject  is  not  so  familiar,  it  seems  necessary  to  go 
back  in  some  degree  to  first  principles,  in  order  to  be  equally  understood 
by  all. 

This  mode  of  treating  the  enquiry  may  appear  to  impose  a  tax  upon 
your  patience  ;  but  the  principles  alluded  to  are  generally  of  a  character 
sufficiently  interesting  to  merit  attention  :  even  aside  from  the  purpose 
for  which  they  have  been  introduced.  Beyond  this  patience,  1  have  only 
to  ask  your  candid  and  unbiased  attention  to  the  statement  presented. 

You  are  most  of  you  of  the  class  of  citizens  who  are,  or  have  been, 
subject  to  jury  duty,  you  know  the  state  of  mind  with  which  a  juryman 
should  come  to  his  seat  in  any  trial  of  importance.  The  question  of  a 
National  Bank,  or  no  National  Bank ;  of  Banks  or  no  Banks,  presents 
one  of  the  most  important  civil  cases,  upon  which  you  can  be  called  to 
give  an  opinion. 

In  exercising  your  judgment  upon  the  facts  and  arguments  here  laid  be- 
fore you,  I  trust  you  will  feel  it  a  duty  to  lay  aside  all  party  prejudice  and 
personal  feeling  ;  as  you  would  feel  it  so  in  a  court  of  justice,  where  the 
majesty  of  the  laws,  and  the  well  being  of  your  fellow  citizens  might  de- 
pend upon  your  decision. 

In  this  trust  I  shall  submit  the  case,  reminding  you  only  that  the  wel- 
fare of  YOUR  COUNTRY  is  dependant  upon  your  verdict. 


PART    FIRST. 


SECTION  I. 

Use  and  Importance  of  Money  Capital. 

IN  the  working  of  all  machinery,  it  is  desirable  that  there  should  be  as 
little  loss  of  power  as  possible. 

Suppose  the  steam  engine  of  a  factory  to  be  capable  of  performing  to 
advantage  twice  as  much  as  it  does,  with  the  same  expense  :  there  is 
here  a  loss  of  half  the  power  employed.  If  there  be  two  factories  in  the 
same  neighborhood,  in  one  of  which,  with  the  same  machinery,  and  the 
same  outlay,  only  half  the  work  is  turned  out  which  is  produced  in  the 
other,  the  owner  of  the  establishment  producing  most  will  be  able  to  un- 
dersell the  proprietor  of  the  other  so  much,  that  from  this  circumstance 
alone  the  latter  may  be  obliged  to  relinquish  his  business. 

It  is  equally  desirable  that  a  piece  of  land  should  yield  as  much  as  it  is 
capable  of  producing  with  the  same  labor  and  expense.  Suppose,  for  ex- 
ample, a  field  manured,  and  plowed,  and  prepared  for  seed  :  if  but  one  half 
of  it  be  sown,  there  is  here  a  loss  of  so  much  power.  If  there  be  two 
countries,  both  capable  of  producing  the  same  quantity  of  wheat ;  both 
cultivated  at  the  same  expense  ;  but  one  of  them,  from  want  of  manage- 
ment, producing  only  one  half  of  what  the  other  produces,  the  country  pro- 
ducing most  will  be  able  to  undersell  the  other  so  much  as  to  shut  it  out 
of  any  foreign  market. 

Man  himself  may  be  contemplated  as  a  machine  of  the  same  kind.  If 
a  laborer,  able  to  earn  one  dollar  per  day  for  every  working  day  in  the 
year,  be  employed  but  half  of  this  time,  there  is  in  his  case  so  much  loss 
of  power.  Suppose  two  mechanics,  both  having  it  equally  in  their  power 
to  earn  one  dollar  per  day,  or  three  hundred  dollars  for  the  year  ;  and  both 
subsisting  equally  well  on  one  hundred  and  fifty  dollars  a  year.  If  one  of 
these  persons  work  only  one  hundred  and  fifty  days,  and  the  other  three 
hundred  days,  the  first  will  do  no  more  than  earn  his  bare  subsistence, 
while  the  other  will  not  only  be  able  to  live  as  well  as  his  neighbor,  but 
he  will  lay  up  besides  one  hundred  and  fifty  dollars  at  the  end  of  the  year. 
If  a  year  succeed  in  which  it  is  difficult  for  these  mechanics  to  obtain 
work,  he  who  can  work  the  cheapest  will  soonest  find  employment.  The 
man  who  labors  three  hundred  days  in  the  year,  can  now  work  for  seven- 
ty-five cents  a  day,  and  he  will  live  as  well  as  he  did  before,  and  lay  by 
seventy-five  dollars  at  the  close  of  the  year  ;  while  he  who  works  only 
half  this  time,  cannot  labor  for  less  than  he  did  before,  without  depriving 
himself  of  some  of  the  necessaries  of  life.  It  is  the  same  with  nations. 


Suppose  a  country,  the  inhabitants  of  which  labor  three  hundred  days 
in  the  year  :  and  another,  where,  from  the  number  of  holidays,  the  people 
work  only  one  hundred  and  fifty  days  in  the  year.  The  productions  in 
both  cases  being  the  same,  the  country  where  the  people  labor  most  will 
be  able  to  undersell  the  other.  In  the  country  where  there  are  not  so 
many  holidays,  the  inhabitants  may  become  wealthy  ;  when,  under  the  same 
circumstances,  except  in  this  particular,  the  inhabitants  of  the  other  coun- 
try may  be  impoverished,  and  barely  able  to  sustain  themselves. 

The  result  would  be  the  same,  if  in  one  country  only  half  the  people 
labored,  while  in  the  other  they  were  all  alike  employed.  Where  the 
greatest  number  of  the  people  labor,  in  proportion  to  the  whole  number  of 
consumers,  there,  other  things  being  equal,  the  productions  of  the  country 
will  be  afforded  at  the  lowest  rate.  The  difference  arising  from  the  loss, 
or  gain,  in  labor  power. 

What  is  true  of  loss  of  power  in  regard  to  the  labor  of  men,  or  to  the  cul- 
tivation of  land,  or  to  the  working  of  a  machine,  is  equally  true  with  regard 
to  capital,  or  to  that  part  of  property  which  is  capable  of  being  employed 
so  as  to  yield  a  profit. 

Suppose  a  man  to  earn  by  his  labor  three  hundred  dollars  a  year,  while 
his  whole  expenses  do  not  exceed  two  hundred  dollars.  At  the  end  of 
the  year,  he  will  have  one  hundred  dollars,  to  be  lent  on  interest,  or  to  be 
employed  in  trade,  so  as  to  give  him  a  profit.  This  one  hundred  dollars 
is  so  much  capital.  If  this  capital  be  placed  out  at  interest,  the  one  hun- 
dred dollars  has  the  power  of  producing  six  or  seven  dollars  at  the  end  of 
the  year.  If  it  be  employed  in  trade,  it  will  probably  produce  more  ;  as 
interest  may  be  considered  somewhat  less  than  the  lowest  profit  expected 
in  the  place  where  it  is  given  ;  no  one,  as  a  general  rule,  being  willing  to 
give  more  interest  for  money,  than  he  expects  to  make  profit  out  of  it — 
while  many  will  pay  interest  for  a  very  small  gain  over  and  above  this  inter- 
est. If  this  capital  of  one  hundred  dollars,  however,  be  allowed  to  remain 
idle,  it  gains  neither  interest  nor  profit.  Here,  then,  is  so  much  loss  of 
power  in  capital.  Of  course  the  importance  of  this  loss  of  power  increases 
in  proportion  to  the  amount  of  capital,  or  of  any  number  of  capitals,  thus 
left  idle. 

All  the  capital  in  the  world  may  be  considered  as  so  much  saving  from 
the  compensation  of  labor  of  some  kind,  after  deducting  expenses.  The 
capital  of  every  country  consists  of  the  savings  of  labor  of  that  country, 
together  with  the  accumulated  savings  of  labor  which  have  been  brought 
into  it  from  other  countries.  A  nation  becomes  richer,  or  more  prosperous, 
in  proportion  as  more  or  less  of  the  whole  capital  of  the  country  is  employ- 
ed so  as  to  yield  a  profit.  If  only  half  the  amount  be  employed  which 
might  have  been  employed  to  equal  advantage,  the  nation  will  not  increase 
in  riches  half  as  much  as  it  might. 

Suppose  two  countries  with  each  the  same  amount  of  capital,  and  each 
subject  to  the  same  expenses  for  consumption.  If  one  of  these  countries 
employ  only  half  its  capital,  and  the  other  employ  the  whole,  both  at  the 
same  rate  of  profit,  the  last  will  be  able  to  furnish  its  produce,  other,  th'ings 
being  equal,  at  a  rate  so  much  cheaper  than  the  first,  as  perhaps  to  shut  it 
out  of  a  foreign  market. 

Suppose  two  men  employed  in  the  same  trade,  each  having  a  capital  of 
ten  thousand  dollars,  and  each  being  subject  to  the  same  expense  of'iiving, 
equal  to  the  profits  on  one  half  of  this  capital.  If  one  of  them  employ 
the  whole  of  his  ten  thousand  dollars,  he  will  be  able,  besides  his  expen- 


ses,  to  lay  up  as  much  more  at  the  end  of  the  year  ;  while  the  other,  who 
keeps  five  thousand  dollars  of  his  money  idle,  may  be  barely  able  to  make 
both  ends  meet.  The  first  will  therefore  be  able  to  undersell  his  neigh- 
bor, and  accumulate  a  surplus  from  a  reduced  rate  of  profit ;  while  the 
other  must  deprive  himself  of  some  of  the  necessaries  of  life,  in  order  to 
sell  his  goods  at  the  same  prices.  Such  is  the  consequence  of  the  loss  of 
power  in  respect  to  capital. 

The  operation  is  the  same  with  nations.  As  we  have  seen,  where  the 
capital  of  both  countries  are  the  same,  the  country  which  employs  most 
of  its  capital  will  have  the  advantage  of  the  other  ;  but  we  may  go  still 
further.  Suppose  two  countries,  one  of  which  has  a  much  larger  capital 
than  the  other,  but  which  does  not  employ  so  much  of  this  capital  as  it 
might :  the  other  with  less  capital  employs  the  whole  amount ;  other  cir- 
cumstances being  the  same  in  both  cases.  The  country  with  the  smallest 
capital  is  able  to  compete  so  much  the  better  with  the  richer  country,  in 
proportion  as  one  has  a  great  deal  of  its  capital  lying  idle,  while  the  other 
gives  full  employment  to  every  dollar  that  can  be  scraped  together.  Hence 
the  less  capital  any  country  may  possess,  in  proportion  to  the  capitals  of 
its  richer  neighbors,  the  more  desirable  it  is  that  there  should  be  no  loss 
of  power,  by  allowing  any  part  of  this  smaller  capital  to  remain  idle  or 
dormant. 

Great  Britain  affords  the  example  of  a  country  where  there  is  probably 
the  least  loss  of  power,  either  in  respect  to  time,  labor,  or  capital  ;  and  to 
this  peculiarity  she  is  no  doubt  indebted  for  much  of  her  pecuniary 
prosperity. 

Spain  and  Italy,  on  the  other  hand,  afford  examples  of  power  lost,  in  all 
these  particulars.  A  great  portion  of  the  year,  in  those  countries,  being 
occupied  with  holidays,  and  the  habits  of  the  people  inducing  them  to  la- 
bor only  so  much,  and  so  long,  as  may  be  absolutely  necessary  for  their 
subsistence.  The  wealth  of  these  countries  being  in  possession  of  com- 
paratively a  small  number  of  persons,  and  many  of  these  persons  allowing 
a  large  part  of  what  they  possess  to  be  in  a  great  degree  idle  and  unim- 
proved ;  while  there  are  few  or  no  institutions  to  enable  the  small  capi- 
talists to  bring  their  means  together,  in  order  that  the  whole  sum  may  be 
employed  by  those,  who  would  be  able  and  disposed  to  make  a  profitable 
use  of  it. 

In  most  of  the  old  countries,  as  they  are  called,  the  capital,  though  in 
few  hands,  is  abundant  in  proportion  to  the  opportunities  of  employing  it. 
Under  such  circumstances,  the  occasion  of  economizing  this  kind  of  power, 
is  less  sensibly  perceived.  In  the  United  States  of  America,  on  the  con- 
trary, as  in  all  new  countries,  the  capital  is  small  in  proportion  to  the  va- 
rious profitable  uses  to  which  it  may  be  applied.  With  a  very  few  indi- 
viduals there  may  be  an  abundance  of  capital,  but  with  the  mass  of  the 
people  engaged  in  business  there  is  a  want  of  it ;  and  in  any  competition 
which  arises  in  trade  or  manufacture,  between  these  United  States  and  the 
nations  of  the  old  world,  those  countries,  having  by  far  the  largest  capitals, 
will  possess  in  this  respect  an  almost  overwhelming  advantage.  Hence 
in  the  United  States  it  is  particularly  desirable  that  all  the  capital  which 
the  country  can  command,  from  whatever  source  it  may  be  derived,  should 
be  drawn  into  active  operation,  and  should  be  so  continued,  that  in  this 
particular  there  may  be  no  loss  of  power. 


8 

N.  B.  The  important  advantages  of  capital  may  perhaps  be  further  illustrated 
by  a  few  instances  of  the  inconvenience  resulting  from  the  want  of  it. 

As  capital  unemployed  is  power  lost,  so  the  unemployed  faculties  of  enterprise 
and  industry  are  equally  power  lost.  Add  to  this,  we  may  say,  as  a  general  rule, 
the  faculty  of  capital,  and  the  operative  faculty,  must  be  brought  together,  or  the 
power  of  both  are  Jost. 

Suppose  a  person  to  possess  an  immense  tract  of  land  in  a  country  entirely  unin- 
habited. Such  an  individual  is  a  large  capitalist  in  land,  but  as  there  is  no  one  to 
improve  his  land,  his  capital  is  idle.  It  is  entirely  unprofitable,  for  want  of  being 
brought  within  the  reach  of  the  enterprise,  activity  and  labor,  of  those  who  might 
improve  it.  Here  is  so  much  lost  power  in  capital. 

Suppose,  on  the  other  hand,  a  number  of  persons  accustomed  to  farming,  to  be 
brought  together  in  a  place  where  there  is  no  land  to  be  cultivated,  and  to  be  in  a 
situation  disenabling  them  from  doing  any  thing  else.  Here  is  so  much  labor  power 
lost,  because  it  cannot  be  brought  within  the  reach  of  capital  in  land- 

It  is  the  same  with  money.  We  may  suppose  a  person  possessed  of  a  million  of 
dollars,  which  he  can  neither  employ  himself,  nor  lend  out  on  interest;  there  being 
no  one  within  his  reach,  of  enterprise  and  activity,  to  make  use  of  his  funds.  Here 
is  power  in  money  capital  lost,  for  want  of  meeting  with  the  operative  power. 

So,  on  the  other  hand,  a  number  of  industrious  and  enterprising  persons  accustom- 
ed to  different  branches  of  manufacture,  may  be  living  in  a  village  on  the  banks  of  a 
rapid  stream,  admirably  calculated  for  mill-seats,  all" idle,  and  suffering  from  want 
of  employment.  Ask  these  persons  why  they  do  not  go  to  work,  set  up  mills,  and 
engage  in  manufacturing.  They  will  say  they  have  no  money,  and  there  is  no  one 
from  whom  they  can  borrow  any.  They  cannot  build  mills  without  money.  They 
cannot  procure  the  raw  material  without  money,  they  are  therefore  idle.  Here  is  a 
loss  of  Labor  power,  for  want  of  being  brought  within  the  reach  of  money  capital. 

Suppose  in  the  same  place  some  person  to  come  forward  with  money  sufficient  to 
build  mills,  and  furnish  machinery,  but  not  having  means  sufficient  to  purchase  the 
raw  material.  The  mills  when  built,  are  idle,  and  the  people  are  still  idle.  Here 
there  is  a  loss  both  of  money  power  and  labor  power,  for  want  of  sufficient  capital. 

We  may  see  the  same  operation  in  a  town  or  city.  There  may  be  vacant  lots  ; 
there  may  be  materials  for  building;  there  may  be  abundance  of  mechanics  and  la- 
borers desirous  of  employment,  but  if  there  be  no  money  with  which  to  build,  all  this 
power  in  lots,  and  materials,  and  labor,  remain  idle  for  want  of  sufficient  capital. 
So  in  ship-yards,  materials  and  workmen  may  abound ;  but  if  no  one  have  money  to 
pay  for  building  vessels,  the  capital  in  materials  and  tools,  and  the  faculty  in  the 
workmen,  is  so  much  power  lost,  for  want  of  further  capital.  The  same  with  the 
merchant ;  his  warehouses  may  be  built,  his  ships  may  be  ready  to  receive  cargoes, 
his  masters  and  mariners  may  be  anxiously  waiting  for  employment ;  but  if  there  be 
not  capital  enough,  to  load  his  vessels,  there  must  be  here  again  a  double  loss  of 
power.  Nor  is  it  the  shipping  merchant  alone  that  suffers  in  this  way.  The  grocer, 
the  linen  draper,  the  artizan,  and  the  trader  of  every  description,  must  not  only  have 
the  use  of  capital,  but  he  must  have  the  use  of  sufficient  capiial,  to  enable  him  to  car- 
ry on  his  business  advantageously  ;  and  what  is  true  of  each  individual,  is  true  of  the 
whole  nation.  The  country  must  not  only  have  capital,  but  it  must  have  the  use  of 
sufficient  capital,  to  enable  it  to  employ  that  which  it  has  to  advantage.  Capital  un- 
employed is  power  lost;  the  faculty  of  labor  unemployed  for  want  of  capital,  is 
power  lost;  and  capital  idle,  and  the  faculty  of  labor  unemployed  for  want  of  suffi- 
cient capital,  is  a  double  lods  of  power. 

SECTION  II. 

Discrimination  to  be  made  between  real  and  fictitious  capital. 

IN  speaking  of  the  importance  of  capital,  it  is  to  be  borne  in  mind  that 
we  mean  real  and  not  fictitious  capital.  The  latter,  it  is  true,  may  some- 
times be  the  means  of  yielding  profit  to  the  possessor,  but  its  operations 
partake  of  the  character  of  fraud.  They  may  transfer  property  from  the 
possessions  of  one  person  to  that  of  anotber,  but  what  one  gains  the  other 
loses.  The  dealer  in  fictitious  property  may  make  a  profit  on  the  real 
property  of  which  he  gets  possession,  but  in  that  case  he  gains  a  profit, 
which  does  not  belong  to  him,  the  owner  of  the  real  capital  being  the  per- 


9 

son  to  whom  the  profits  on  that  capital  rightly  belong.  Like  all  other 
acts  of  injustice  therefore,  dealing  in  fictitious  capital  must  result  in  loss 
to  some  one,  and  should  like  other  frauds  be  discountenanced,  on  the  com- 
mon principles  of  justice.  Such  dealing  may  not  always  be  accompanied 
with  fraudulent  intentions  ;  and  so  far  it  may  not  be  considered  criminal, 
but  its  result  to  the  community  is  the  same  as  the  execution  of  an  absolute 
fraud. 

Aside  however  from  the  question  of  justice,  real  capital  is  something 
limited  in  its  amount,  it  cannot  exceed  a  certain  extent,  whatever  public 
confidence  may  be.  Fictitious  capital  on  the  contrary  is  unlimited.  It  may 
be  created  to  any  extent,  so  long  as  it  is  sustained  by  the  confidence  of 
the  public,  or  of  a  sufficient  portion  of  the  public.  At  the  same  time,  like 
other  frauds,  it  must  ultimately  be  rJetecteJ  ;  and  whenever  the  illusion 
vanishes,  a  reaction  takes  place  in  proportion,  and  more  than  in  propor- 
tion to  the  magnitude  of  the  fiction.  The  advantages  supposed  to  have 
been  gained,  disappear,  and  the  loss  falls  upon  those  who  are  compara- 
tively most  innocent  of  the  cause,  and  least  able  to  suffer  the  disasterous 
consequences. 

Heal  capital  is  something  which  has  cost  so  much  labor ;  more  or  less 
of  it  may  be  brought  into  activity,  but  the  whole  quantity  of  it  cannot  be 
increased  except  by  labor.  More  or  less  of  it  may  be  withdrawn  from  ac- 
tivity : — it  may  be  more  or  less  in  demand  for  use  ;  but  wherever  it  is, 
whether  dormantor  active,  it  has  a  value  attached  to  it ;  and  although  the  call 
for  it  may  vary,  the  reaction  in  its  value  can  never  be  so  ruinous,  as  in  the 
case  of  fictitious  capital.  Time  is  required  for  the  increase  of  real  capi- 
tal, because  it  requires  labor,  but  fictitious  capital  may  be  increased  sud- 
denly, or  at  once,  almost  to  any  extent,  and  it  may  as  suddenly  disappear. 

The  laborer,  who  lays  by  one  hundred  dollars  every  year  from  the  sa- 
vings of  his  labor,  requires  two  years  to  lay  by  two  hundred  dollars.  But  the 
man  who  passes  his  check  or  order  upon  a  Bank,  where  he  has  no  money, 
for  two  hundred  dollars,  raises  this  amount  as  it  were  in  an  instant  ;  and 
this  fictitious  capital  lasts  as  long  as  the  check  passes  from  hand  to  hand, 
before  it  gets  to  the  Bank;  but  as  soon  as  it  comes  there  and  the  real  character 
of  the  check  is  detected,  the  illusion  vanishes,  and  the  last  holder,  having 
parted  with  this  real  capital  in  exchange  for  what  proves  to  be  fictitious, 
loses  the  whole.  We  have  only  to  suppose  a  multitude  of  laborers,  each 
requiring  a  year  to  lay  by  one  hundred  dollars,  to  perceive  how  slowly  in 
comparison,  real  capital  increases  ;  and  we  have  only  to  imagine  a  state 
of  great  public  confidence,  in  which  a  multitude  of  persons  give  their  or- 
ders or  checks  on  a  Bank,  or  Banks,  where  they  have  no  money,  which 
checks  are  passed  from  hand  to  hand,  to  perceive  how  suddenly  fictitious 
capital  may  be  created  ;  and  we  have  only  to  imagine  further,  a  moment, 
when  this  state  of  confidence  ceases,  and  each  of  these  orders  is  brought 
to  the  Bank,  upon  which  it  is  drawn,  to  perceive  how  suddenly  this  ficti- 
tious capital  may  all  disappear  ;  and  what  a  loss  it  must  occasion  to  the 
last  holders  of  these  orders.  All  persons  giving  out  promissory  notes, 
and  all  Banks  issuing  bills,  give  orders  on  themselves.  If  they  have  in  their 
possession  the  real  capital  to  meet  their  notes  or  bills,  their  orders  represent 
so  much  real  capital,  forthcoming  whenever  it  is  called  for  ;  but  if  they  have 
nothing  whatever  to  meet  their  drafts,  their  orders,  then  represent  nothing  ; 
and  whatever  use  may  be  made  of  them,  or  through  whatever  hands  they  may 
pass,  they  are  only  fictitious  capital.  As  soon  as  the  state  of  confidence 
oeases,  and  every  note  or  bill  is  tried,  that  is,  as  soon  as  every  order  is 

2 


10 

brought  to  the  point  upon  which  it  is  drawn,  the  bubble  bursts,  and  ruin  to 
the  last  holders  is  the  consequence.  Whatever  the  number  of  actors  may 
be,  and  however  important  may  be  their  operations,  the  whole  multitude 
act  the  part  of  the  man,  who  draws  a  check  upon  a  Bank  where  he  has  no 
money.  The  injustice  and  inexpediency  of  such  a  state  of  things  are 
evident.  The  inexpediency  appears  more  strongly,  when  we  consider 
how  unavoidably  this  real  and  fictitious  capital  become  mixed  together,  and 
how  difficult  it  is  to  distinguish  between  them,  after  they  have  passed  from 
first  hands;  how  much  every  increase  of  fictitious  capital  leads  to  an  increase 
in  the  imaginary  value  of  every  article  boughtor  sold,  and  how  much  this  in- 
crease of  imaginary  value  leads  to  a  further  increase  of  fictitious  capital. 

If  in  a  community,  possessing  one  hundred  millions  of  capital,  the  pro- 
duct of  labor,  this  capital  be  suddenly  supposed  worth  two  hundred  mil- 
lions, although  the  property,  by  which  this  estimate  is  made  be  precisely 
the  same  as  it  was  before,  no  sooner  does  anything  happen  to  bring  the 
matter  to  a  test,  than  this  imaginary  one  hundred  millions  disappears.  There 
is  nothing  in  the  Bank  to  meet  the  order ;  and  the  loss  falls  upon  the  last 
holders,  who  were  perhaps  entirely  innocent  of  any  share  in  promoting 
the  error.  Meantime  the  fiction  has  been  the  means  of  transferring  pro- 
perty from  one  hand  to  another  ;  a  few  individuals  may  be  richer  for  it, 
but  real  capital  is  not  increased. 

We  must  bear  in  mind,  however,  that  there  is  an  important  distinction 
between  fictitious  capital,  and  borrowed  capital.  Borrowed  capital  may  be 
as  real  as  that  which  is  not  borrowed.  If  the  laborer,  who  has  laid  by 
one  hundred  dollars  in  silver,  from  the  earnings  of  the  past  year,  lend  this 
money  to  his  friend,  to  be  used  perhaps  in  his  business  as  a  grocer.  This 
one  hundred  dollars  is  as  much  real  capital  after  it  is  lent,  as  it  was  be- 
fore. It  is  as  much  real  capital  in  the  hands  of  the  grocer,  as  it  was  in 
those  of  the  laborer.  Suppose  the  grocer  deposit  the  one  hundred  dol- 
lars in  the  Bank,  and  allow  it  to  remain  there,  it  is  still  the  same  real 
capital  that  it  was.  It  still  represents  the  one  hundred  dollars  worth  of 
labor  saved  from  the  years'  earnings.  Suppose  the  Bank  lend  this  one 
hundred  dollars  to  a  linen  draper,  who  uses  it  in  his  trade  ;  it  is  still  the 
same  real  capital  in  the  hands  of  the  linen  draper,  that  it  was  at  first  in 
the  money  box  of  the  laborer  ;  and  yet  it  has  been  borrowed  capital  in  the 
hands  of  every  holder  from  the  time  it  left  those  of  the  laborer. 

Real  capital,  however,  although  it  may  be  borrowed  and  lent,  and  lent 
and  borrowed  again,  without  changing  character,  cannot  be  increased  in 
amount  without  labor.  If  the  grocer  wish  to  borrow  fifty  dollars  more 
of  the  laborer,  he  must  wait  till  the  latter  has  laid  up  so  much  money  ;  for 
if  the  laborer  lend  only  his  note  to  be  paid  from  the  earnings  of  the  next 
six  months,  this  note  is  fictitious  capital,  and  not  real,  until  the  earnings 
have  been  actually  laid  by  to  meet  it.  As  then  real  capital  requires  labor 
and  time  to  be  increased  in  amount,  there  can  be  no  such  sudden  and  un- 
limited increase  of  it,  as  in  the  case  of  fictitious  capital ;  and  as,  on  the 
other  hand,  labor  generally  speaking,  leaves  its  value  behind  it,  there  can- 
not be  the  sudden  and  extraordinary  depreciation  in  real  capital,  to  which 
fictitious  capital  must  be  subjected.  At  the  same  time  real  capital,  wheth- 
er in  the  possession  of  a  lender,  or  borrower,  can  have  nothing  of  fraudu- 
lent character  attached  to  it.  The  laborer  who  has  laid  by  his  money,  has 
a  right  to  lend  it,  and  has  a  right  to  the  interest  paid  for  the  use  of  it ; 
and  the  borrower  has  a  right  to  all  the  profits  gained  by  the  use  of  it,  after 
paying  the  interest. 


11 

Fictitious  capital  may  be  created  by  the  promises  of  individuals,  of 
Banks,  or  other  incorporated  institutions,  or  of  governments.  If  a  mer- 
chant give  out  a  note  payable  in  six  months,  in  expectation,  that  his  profits 
will  enable  him  to  pay  it  when  it  becomes  due  ;  this  note  is  fictitious  capi- 
tal till  the  profits  be  earned.  If  a  bank,  or  trust  company  give  out  a  note, 
or  bond,  to  be  paid  by  something  that  is  to  be  earned,  this  also  is  fictitious 
capital  till  the  earning  is  made  to  meet  it.  If  the  government  issue  its 
notes,  or  bonds  to  be  paid  out  of  the  revenue  of  another  year,  this  also  is 
fictitious  capital  till  the  revenue  accrue.  If  the  merchant  give  out  his 
note  at  six  months  without  any  expectation,  or  intention  of  paying,  and 
without  the  ability  of  paying  it :  calculating  that  his  credit  will  give  cir- 
culation to  the  note,  and  enable  him  to  raise  money  from  it,  this,  it  is  evi- 
dent, is  not  only  creating  fictitious  capital,  but  it  is  perpetrating  a  fraud. 
If  a  Bank,  or  trust  company  issue  notes  or  bonds,  merely  upon  the  cal- 
culation that  its  credit  will  give  these  paper  promises  circulation  ;  and 
without  the  ability,  or  intention  of  paying  these  obligations,  this  also  is 
not  only  creating  fictitious  capital ;  but  it  is  as  much  a  fraud,  as  any  that 
an  individual  can  be  guilty  of,  in  obtaining  money  on  false  pretences.  And 
if  a  government  issue  its  promises  to  pay,  without  any  intention  of  re- 
deeming these  promises,  this  also  must  be  a  fraudulent  transaction  :  while 
these  promises  remain  unredeemed.  Whether  bearing  the  name  of  assignats 
or  exchequer  bills,  or  government  bonds,  or  treasury  notes,  they  are  all  as 
much  fictitious  capital,  as  the  promises  of  the  merchant,  who  gives  out  a 
note,  which  he  cannot,  and  never  intends  to  pay. 

Such  being  the  nature  of  fictitious  capital,  it  is  easy  to  perceive  how  sud- 
denly it  may  be  increased  ;  and  how  subject  it  must  be,  both  to  increase  and 
to  decrease,  and  consequently  how  directly  it  must  produce  a  corresponding 
fluctuation  in  prices.  If  in  a  community  possessing  a  real  capital  of  one 
hundred  millions  of  dollars,  there  be  one  hundred  millions  of  fictitious  capi- 
tal added  and  mixed  up  with  the  real ;  the  property  belonging  to  this 
community,  being  precisely  the  same  ;  the  prices  must  be  doubled,  or 
doubled  on  an  average,  some  articles  more  and  some  less.  But  the  whole 
property  being  still  the  same,  it  is  evident  that  the  representative  of  real 
capital  has  depreciated  in  value  by  being  mixed  with  fictitious  capital,  pro- 
ducing the  difference  in  price.*  In  other  words,  the  currency  has  depre- 
ciated, what  is  called  currency,  being  the  money  denomination  by  which 

*  A  silver  dollar,  for  example,  is  a  representative  of  so  much  real  capital,being  the 
product  of  a  certain  amount  of  labor  which  can  hardly  vary;  or  which  varies  very 
slowly,  and  almost  insensibly;  depending  on  the  facility  of  working  the  mines,  of 
purifying  the  metal,  of  coining  and  bringing  the  coin  into  market. 

If  in  a  place  where  the  paper  currency  has  depreciated  one  half,  a  laborer  despo- 
site  one  hundred  silver  dollars  in  a  Bank,  which  pays  out  only  paper,  the  laborer's  rep- 
resentative of  real  capital,  immediately  loses  one  half  of  its  value,  and  even  with- 
out going  to  this  extreme,  if  in  consequence  of  excessive  issues  of  Bank  paper,  (the 
Banks  still  paying  specie,)  property  of  various  kinds,  so  rise  in  price  that  it  requires 
a  dollar  and  a  half  to  purchase  what  a  dollar  did  before,  the  silver  dollar  will  repre- 
sent only  two  thirds  of  what  it  did  previously.  This  depreciation  of  the  represen- 
tative of  real  capital  arising,  as  we  may  say,  merely  from  the  circumstance  of  its 
being  found  in  so  much  bad  company.  The  consequence  of  the  first  of  these  suppo- 
sitions must  be,  that  the  laborer  will  not  again  put  his  silver  money  into  the  Bank : 
so,  from  the  moment  a  Bank  stops  paying  out  specie,  specie  will  no  mofe  go  in  to  it. 
Under  the  second  supposition,  the  silver  dollar  will  go  to  other  places,  and  countries 
where  there  is  not  so  much  of  this  bad  company,  and  where  it  will  be  able  to  com- 
mand its  due  proportion  of  real  capital :  so,  whenever  paper  money  is  too  abundant, 
the  precious  metals  will  disappear,  being  better  treated  where  there  is  less  deprecia- 
tion of  the  currency. 


12 

property  is  estimated  ;  two  hundred  millions  of  capital,  representing  now  no 
more  property  than  one  hundred  millions  did  before  ;  the  dollar  therefore 
is  only  half  of  what  it  was.  If  the  creation  of  fictitious  capital  be  continued, 
the  currency  will  continue  to  depreciate ;  if  this  creation  be  from  time  to 
time  checked,  and  again  increased,  the  currency  will  fluctuate. 

The  increase  of  prices,  benefits  comparatively  a  very  small  number  of 
persons.  Those  who  are  large  holders  of  property  :  the  small  holders  are 
next  benefited,  and  so  in  proportion  ;  but  the  laboring  man  and  those  who  de- 
pend upon  their  daily,  or  weekly  earnings,  gain  nothing  by  the  rise  in 
price ;  on  the  contrary  they  are  obliged  to  pay  more  for  their  food  and 
clothing,  and  shelter,  while  it  is  a  long  time  before  the  depreciation  of  the 
representative  of  capital  or  of  currency  raises  the  price  of  labor.  It  scarcely 
indeed  does  so,  before  a  reaction  takes  place.  When  prices  again  fall,  the 
large  holder  of  property  procured  on  credit  is  ruined  ;  the  consequences  of 
his  ruin  falls  upon  those  who  have  trusted  him  ;  this  again  brings  ruin  upon 
others  ;  and  by  the  time  the  laboring  man,  and  the  mechanic  can  purchase 
their  food  and  clothing  on  better  terms,  this  general  ruin  checks  the  demand 
for  labor,  and  the  rate  of  wages  falls  more  than  the  prices  of  the  com- 
modities, for  which  the  laborer  has  so  much  need. 

We  see  then,  that  in  every  point  of  view,  while  it  is  desirable  to  bring 
into  active  employment  all  the  real  capital  to  be  commanded  ;  whether  that 
real  capital  be  in  the  hands  of  owners,  or  borrowers  ;  it  is  equally  de- 
sirable that  the  creation  of  fictitious  capital  should  be  discountenanced  and 
prevented. 

The  point  we  have  now  to  ascertain,  is,  in  what  way  real  capital  can  be 
most  brought  into  activity,  without  incuring  the  danger  of  bringing  ficti- 
tious capital  along  with  it. 


SECTION  III. 

Utility  of  Banks  in  collecting  and  bringing  into  use  real  Capital,  by  their 
Stocks,  their  Deposites,  and  their  Circulation. 

When  we  speak  of  capital,  we  are  apt  to  think  only  of  large  amounts 
of  property,  in  the  hands  of  single  individuals,  or  in  the  possession  of  cer- 
tain institutions  ;  and  it  then  appears  to  us,  as  if  all  anxiety  about  the  em- 
ployment of  capital,  resulted  from  a  disposition  to  make  the  rich  richer. 
But  this  property  in  the  hands  of  wealthy  individuals,  or  of  moneyed  insti- 
tutions, as  they  are  called,  is  but  a  part,  and  comparatively  but  a  small  part, 
of  the  capital  of  a  country  like  that  of  the  United  States  ;  and  it  is  just 
that  part  about  which  there  is  the  least  occasion  for  anxiety  ^  as  wherever 
money  is  collected  together  in  masses,  under  the  direction  of  men  of  wealth, 
there  is  no  fear  but  (hut-it  will  be  fully  employed  ;  and  in  such  cases  it  may 
be  safely  left  to  itself. 

The  capital  of  a  country,  however,  comprehends  all  the  money  that  is 
in  every  one's  pocket,  arid  all  the  property  that  is  in  every  one's  posses- 
sion. The  poorest  day  laborer,  who  has  a  dollar  more  than  is  necessary 
for  his  immediate  wants,  has  just  this  portion  of  the  capital  of  the  whole 
country.  The  shop  keeper,  who  has  ten  dollars  in  his  drawer  more  than 
he  has  immediate  occasion  for,  has  just  so  much  spare  capital  unemploy- 
ed ;  and  the  old  lady,  whose  whole  property  consists  of  twenty  dollars  in 
silver  change,  laid  up  in  an  old  stocking,  is  a  capitalist  to  this  amount,  as 


13 

well  as  the  old  gentleman  whose  hundreds  of  thousands  may  be  invested 
in  the  stocks,  and  in  real  estate,  and  whose  spare  thousands  may  for  weeks 
remain  to  his  credit  on  the  books  of  the  bank. 

Suppose  in  a  country  where  there  are  no  Banks,  ten  millions  of  persons 
keeping  their  money  in  gold  and  silver  by  them  ;  including  the  larger  sums 
which  they  would  be  disposed  to  lend  out,  if  they  had  opportunity — other 
sums  which  they  cannot  lend  out,  because,  although  not  wanted  immedi- 
ately, they  will  be  wanted  in  a  few  days  or  weeks — and  smaller  sums, 
wanted  from  day  to  day  for  the  ordinary  purposes  of  life.  Suppose  that 
each  of  these  persons  had,  in  this  way,  upon  an  average,  fifty  dollars  in 
hard  money — some  indeed  having  nothing,  others  having  several  hun- 
dreds :  many  having  but  from  one  to  ten  dollars  each — others  twenty, 
fifty,  or  one  hundred,  &c.  These  ten  millions  of  persons,  with  fifty  dol- 
lars each,  would  together  furnish  an  available  capital  of  five  hundred  mil- 
lions of  dollars  ;  and  this  real  capital,  too,  being  in  hard  money,  and  the 
savings  of  labor  ;  and  yet  this  whole  five  hundred  millions  of  dollars  distri- 
buted, as  it  is,  in  small  sums  amongst  so  many  millions  of  persons,  is  un- 
employed and  unproductive.  Some  cannot  employ  their  money,  although 
amounting  to  hundreds  of  dollars,  because  they  do  not  know  how,  or  be- 
cause they  are  afraid  to  invest  it ;  with  others,  the  amount  they  have  is  too 
small,  or  the  time  it  will  remain  with  them  too  short,  to  make  it  an  object 
to  employ  it.  Now,  although  these  ten  millions  of  persons  may  each  of  them 
think  it  of  very  little  consequence  whether  their  small  savings,  and  money 
wanted  from  day  to  day,  be  improved  or  not,  it  is  clear  that  there  is  here 
au  immense  amount  of  real  capital,  capable  of  being  safely  and  profitably 
employed  by  thousands  even  of  these  very  ten  millions  of  persons,  who 
need  capital  to  enable  them  to  operate  to  advantage  in  their  respective 
branches  of  industry.  To  bring  such  capital  as  this  into  active  use,  is  one 
of  the  designs  of  what  is  called  the  Banking  System,  such  as  it  is  in  this 
country — a  purpose  as  conducive  to  the  general  prosperity,  as  it  is  bene- 
ficial to  the  multitude  of  individuals  needing  the  assistance  to  be  afforded 
them  by  these  means.  Without  Banks,  in  the  case  supposed,  this  amount 
of  five  hundred  millions  of  dollars  remains  dormant  or  idle,  affording  an 
instance  of  so  much  loss  of  power.  With  Banks,  this  amount  is  brought 
into  active  operation,  millions  of  families  are  provided  for,  and  the  pros- 
perity of  the  country  promoted  ;  that  is,  promoted,  provided  the  system  be 
not  carried  to  an  extreme,  producing  an  artificial  state  of  things — an 
extreme  only  to  be  avoided  by  confining  the  system  to  its  proper  purpose, 
that  of  the  employment  of  REAL  CAPITAL. 

From  what  has  been  already  stated,  it  will  readily  appear  that  the  proper 
and  lawful  design  of  a  Bank,  is  not  to  create  capital  where  none  exists — 
which,  in  fact,  would  be  creating  only  what  is  fictitious — but  to  bring  into 
use  the  capital  otherwise  remaining  idle,  and  to  call  in  such  as  may  be 
wanted  in  the  neighborhood  of  the  Bank,  from  other  places  where  it  is  not 
wanted.  If  Banks  do  more  than  this,  if  they  attempt  to  CREATE  capital, 
they  go  beyond  the  limit  of  their  business  ;  they  abuse  the  power  com- 
mitted to  them,  and  become  the  means  of  doing  injury,  instead  of  doing 
good.  For  this  error,  however,  the  Banking  System,  properly  conducted, 
is  not  answerable.  The  reproach  falls  upon  the  individuals  who  conduct 
the  business  improperly.  Since,  however,  amongst  the  conductors  of 
Banks,  there  must,  and  always  will  be,  persons  of  every  variety  of  charac- 
ter and  circumstance,  the  desirable  object  is,  not  to  abolish  the  Banking 
System,  but  to  furnish  it  with  such  checks  and  regulations,  as  may  be  re- 


14 

quisite  to  prevent  abuse  of  power,  and  to  remedy  errors  of  judgment  on  the 
part  of  any  of  those  engaged  in  the  management  of  these  institutions. 

A  Bank  gives  activity  to  capital,  by  lending  out  its  money  to  those  who 
employ  this  money  in  business.  Here  there  are  two  parties  benefited : 
the  party  concerned  in  the  Bank,  by  receiving  interest  on  the  money  lent 
— and  the  party  borrowing,  by  the  profit  made,  over  and  above  the  interest 
required  for  the  use  of  the  money. 

There  are  three  means  by  which  a  Bank  obtains  the  money  thus  lent : 

1st.  The  sums  contributed  by  subscribers,  or  stockholders,  constituting 
what  is  called  its  capital  stock. 

2d.  The  sums  left  in  the  Bank  at  different  times,  partly  for  safety,  and 
partly  for  the  convenience  of  those  to  whom  they  belong,  which  sums  are 
called  its  deposites. 

3d.  The  smaller  sums  held  in  place  of  its  own  notes,  or  bills ;  each 
Bank  note  being,  in  effect,  an  order  given  by  the  Bank  on  itself,  for  so 
much  money  which  it  has  received,  and  which  is  to  be  returned  when 
called  for  :  that  is,  whenever  the  note,  or  order,  is  presented. 

The  capital  stock  is  made  up  partly  by  those  who  have  large  sums  to 
contribute,  and  who  accordingly  take  a  large  number  of  shares  ;  and  partly 
by  those  who  have  only  small  sums  to  contribute,  and  who  take  but  few 
shares.  To  accommodate  more  especially  this  latter  class,  Bank  shares 
are  usually  from  twenty-five  to  fifty  dollars  each. 

The  larger  stockholders,  as  they  are  called,  are  generally  persons  out 
of  the  way  of  business  themselves,  or  having  more  money  than  they  want 
to  employ  in  business.  They  would  be  always  ready  to  lend  their  money 
without  the  aid  of  a  Bank,  if  they  could  be  satisfied  with  the  security  of- 
fered ;  but  from  the  mere  circumstance  of  being  out  of  business,  many  of 
them  do  not  know  so  well  whom  to  trust,  and  they  are  timid  and  cautious 
in  proportion,  as  the  sums  they  have  tp  lend,  are  the  savings  of  a  long  period 
of  industry.  They  prefer,  therefore,  putting  their  money  into  the  capital 
of  a  Bank,  to  be  lent  out  by  the  directors — these  directors  knowing  best  to 
whom  money  may  be  lent  with  safety ;  and  in  case  of  any  bad  debt,  the 
loss  being  distributed  in  proportion  amongst  a  large  number  of  stockhold- 
ers, instead  of  falling,  as  it  might  otherwise  do,  upon  a  single  individual. 
In  addition  to  this,  where  there  is  no  Bank,  the  borrower  and  the  lender 
cannot  always  meet  each  other  at  the  right  time.  The  man  who  has 
money  to  lend,  may  keep  it  idle  on  this  account  for  weeks,  or  months  ; 
while  he  who  wishes  to  borrow  it,  does  not  know  to  whom  to  apply,  or 
where  to  look  for  it.  Here  both  parties  lose  :  the  holder  of  money  loses 
his  interest  for  so  much  time,  and  the  business  man  loses  the  opportunity 
of  making  the  profit  he  would  have  earned  beyond  the  interest  on  the 
amount  borrowed. 

This  is  still  more  the  case  with  small  stockholders.  Those  possessing 
one,  two,  three  or  four  hundred  dollars.  Without  a  Bank  they  would  know 
still  less  to  whom  to  lend  with  safety ;  they  would  be  still  less  likely  to 
meet  the  trust  worthy  borrower  at  the  right  moment ;  while  this  borrower 
of  one  thousand,  or  perhaps  two  thousand  dollars,  would  find  it  still  more 
difficult  to  collect  the  amount  from  several  different  individuals.  He 
would  neither  know  where  to  look  for  them,  nor  would  they  know  his 
credit  sufficiently  if  they  met  with  him.  Such  must  be  the  case  espe- 
cially with  numbers  of  widows  and  orphans,  whose  property  is  now  in- 
vested in  bank  stock.  These  small  sums  would  frequently  be  idle,  or  be 
left  in  unsafe  hands,  if  they,  or  their  agents,  were  obliged  to  wait  till  the 


15 

right  person  came  along  to  borrow  them.  Besides  this,  the  owner  of  the 
small  sum  has  the  advantage,  in  a  Bank,  of  joining  that  small  amount  to  a 
much  larger  one,  and  thus  not  only  lends  it  when  it  might  otherwise  remain 
idle,  but  he  obtains  also  for  his  small  loan  the  same  security  as  that  which 
is  given  for  the  large  one. 

Here  then  we  see  by  the  institution  of  a  Bank,  a  variety  of  capitals, 
some  larger  and  some  smaller,  collected  together  in  a  common  reservoir, 
a  public  depot  where  all  who  need  capital  may  make  application  for  it.  A 
Bank  being  a  common  place  of  meeting,  where  the  money  of  the  lenders 
goes  to  meet  the  wants  of  the  borrowers,  although  the  borrower  and  the 
lender  are  entirely  unknown  to  each  other.  By  this  arrangement,  too,  the 
lender's  money  is  not  suffered  to  remain  idle  ;  it  is  no  sooner  returned  by 
one  borrower,  than  it  is  taken  by  another.  Thus  accommodating  every 
one,  affording  interest  to  one  party,  and  profit  to  another ;  with  the  advan- 
tage, too,  of  a  mutual  assurance  amongst  the  stockholders,  to  provide  against 
the  risk  of  loss. 

Nor  is  it  merely  from  the  immediate  neighborhood  of  a  Bank,  that  these 
various  large  and  small  capitals  may  be  collected.  Persons  in  New  York 
may  want  to  borrow  more  than  could  be  lent  them  by  citizens  of  New  York 
or  of  its  vicinity ;  but  there  may  be  others  at  a  distance,  who  have  their  larg- 
er and  their  smaller  sums  to  lend.  Such  lenders,  indeed,  cannot  tell  who 
they  may  trust  with  safety  in  New  York,  but  they  can  place  their  money 
in  the  stock  of  a  New  York  Bank,  and  it  will  then  be  lent  out  on  the  same 
security  as  that  upon  which  the  money  of  New  Yorkers  is  lent.  Thus 
capitals  are  brought  into  one  state  from  neighboring  states,  to  form  Bank 
capital  where  it  is  most  needed  ;  and  thus  not  only  the  wealthy  banker  of 
Europe  and  Asia  may  invest  his  thousands,  but  the  manufacturer  also,  or 
mechanic,  of  England,  France,  or  Germany,  and  even  of  Turkey,  and  Chi- 
na, may  invest  his  one,  two,  or  five  hundred  dollars,  in  the  bank  stocks  of 
different  sections  of  the  United  States.  Capital  naturally  flows  from  places 
where  it  is  least  wanted,  to  those  where  it  is  most  wanted,  provided  there 
be  no  want  of  confidence,  either  in  the  liberty  or  security  which  it  is  to 
meet  with.  The  small  capitalist  of  England,  or  France,  placing  his  sur- 
plus with  the  large  capitalists  of  London,  or  Paris,  and  the  latter  in  turn 
transfering  his  surplus  to  the  moneyed  institutions  of  the  United  States  ; 
the  rich  banker  of  Europe  acting  as  a  supply  engine  to  procure  funds  for 
the  wants  of  this  c6untry,  leaving  it  to  our  own  Banks  to  distribute  this 
supply  where  it  is  most  called  for. 

We  see,  then,  that  Banks  by  means  of  their  stockholders,  collect  a  va- 
riety of  large  and  small  capitals,  from  their  own  neighborhood,  and  from 
distant  places  ;  by  which  operation,  both  the  owners  of  these  capitals,  and 
the  borrowers  of  them  from  the  Banks,  are  mutually  benefited,  and  the 
power  of  so  much  capital  is  saved,  which  would  otherwise  be  in  a  great 
measure  lost. 

Let  us  now  see  in  what  manner  the  deposites  of  a.  Bank  are  the  means 
of  bringing  capital  into  employment,  which  might  otherwise  remain  idle. 

Almost  every  member  of  a  commercial  community,  has  from  time  to 
time  sums  of  money  on  hand,  to  be  paid  out  at  some  future  period,  or  which 
he  expects  will  soon  be  called  for.  These  sums  may  vary  from  fifty,  or  one 
hundred  dollars,  to  tens  of  thousands  ;  the  holder  of  the  money  may  not 
be  the  owner  of  it ;  he  cannot  purchase  any  thing  with  it,  and  cannot  venture 
to  lend  it  out,  or  he  may  want  it  to-morrow,  or  next  day,  or  next 
week.  With  all  such  persons  it  must  be  a  great  convenience  to 


16 

place  these  sums  in  a  Bank  ;  where  the  amount,  great  or  small,  will  be  safe, 
and  whence  it  may  be  drawn  out  at  any  time,  at  a  moment's  notice.  De- 
posited in  a  Bank,  these  various  sums  form  a  fund  of  which  the  Bank  can 
make  use,  by  lending  out  a  certain  portion  of  it.  The  amount  in  ordinary 
times,  being  about  the  same  every  day;  for  if  one  depositor  draw  out 
money,  another  pays  it  in.  As  we  may  suppose,  in  a  town  where 
there  is  but  one  Bank,  unless  money  be  sent  out  of  the  town  ;  the  man 
who  pays  money,  and  the  man  who  receives  it,  both  keep  their  accounts 
in  the  same  Bank,  so  that  although  one  may  draw,  and  another  deposite, 
in  any  given  day,  the  whole  amount  of  deposites  remains  the  same.  In 
cities  where  there  are  several  Banks,  it  is  not  precisely  the  same,  but  ex- 
perience shows  what  the  average  amount  of  deposites  usually  is,  and 
what  proportion  of  it  the  directors  may  venture  to  lend.  Some  idea  may 
be  formed  of  the  importance  of  these  deposites,  from  the  fact,  that  in  1834, 
by  a  return  made  to  Congress,  the  deposites  in  about  four  hundred  Banks, 
amounted  to  seventy-five  millions  of  dollars.  In  1840,  the  amount  in  six 
hundred  and  sixty  Banks,  was  nearly  the  same.  In  1836  and  1837,  it 
was  much  greater,  but  whether  more  or  less,  if  these  deposites,  instead  of 
being  in  the  Banks,  had  remained  distributed  in  every  person's  house, 
office,  or  store,  the  whole  amount  would  have  been  so  much  idle  capital  ; 
whereas,  in  the  Banks  it  became  available  capital,  to  be  lent  out  to  those 
who  needed  it.  In  the  one  case,  it  is  so  much  power  lost,  in  the  other,  it 
is  so  much  power  employed. 

To  make  the  matter  plainer,  we  may  suppose,  that  in  the  United 
States,  there  are  one  million  of  persons,  having  each,  on  an  average, 
fifty  dollars,  to  be  paid  away  amongst  themselves  in  a  day  or  two. 
Neither  of  these  persons  can  use  his  money,  because  he  is  to  have  it 
for  so  short  a  time  ;  but  as  every  one  deposiies  his  money  in  the  Banks, 
there  is  altogether  in  these  Banks  fifty  millions  of  dollars,  which  fifty 
millions,  the  Banks  themselves  can  lend ;  because  what  one  draws 
out,  another  puts  in.  By  this  contrivance  an  immense  amount  of  capital 
is  placed  in  such  a  situation  that  it  can  be  actively  employed  ;  while  at  the 
same  time  millions  of  persons  are  accommodated  by  the  safety  and  con- 
venience of  the  arrangement ;  and  thousands  are  enabled  to  borrow  the 
amount  they  need,  which  otherwise  could  not  be  obtained  :  and  at  the  same 
time,  the  Bank,  by  receiving  the  interest  on  the  proportion  of  its  loans 
made  from  these  deposites,  is  enabled  to  defray  its  own  expenses,  or  at  least 
partly  enabled  to  do  so. 

The  capital  thus  obtained,  too,  is  the  same  real  capital  as  it  would  have 
been,  had  it  remained  in  the  owner's  trunk,  strong  box,  or  safe  ;  for  the 
circumstance  of  depositing  it  in  the  Bank,  instead  of  keeping  it  in  a  house 
cannot  make  any  difference  as  to  the  nature  of  the  capital.  The  case 
supposed,  being  merely  that  of  having  Banks,  where  every  man's  money 
may  be  placed  for  safe  keeping  and  convenience. 

The  third  means  by  which  a  Bank  gives  employment  to  capital,  other- 
wise in  an  unproductive  state,  is  the  circulation  of  its  own  bills-  Besides 
the  sums  of  money  of  sufficient  consequence  to  be  lent  out,  or  to  be  in- 
vested in  stocks,  or  to  be  deposited  in  Banks  for  safety  and  convenience, 
there  are,  as  is  well  known,  multitudes  of  smaller  sums,  constituting  what  is 
called  spending  money,  and  pocket  money  ;  sums  also  kept  in  tills  of  the 
shop  keeper,  or  in  the  trunk  of  the  mechanic.  Sums  of  one,  two,  three, 
five,  ten,  twenty,  and  even  fifty  dollars,  many  of  these  sums  are  continu- 
ally passing  from  hand  to  hand,  and  form  what  is  commonly  understood  by  the 


17 

circulation  of  the  country.  The  small  sum  laid  up  by  the  laborer,  to  pay 
his  quarter's,  or  monthly  rent,  is  part  of  this  circulation  ;  and  so  is  the 
dollar  paid  by  the  house  keeper  to  the  butcher,  even  while  it  is  passing 
from  hand  to  hand  in  the  market ;  so  is  every  sum  large  or  small,  paid  by 
one  person  to  another,  while  it  is  in  the  act  of  changing  hands. 

Where  there  are  no  Bank  notes,  or  no  Bank  notes  sufficiently  small,  to 
supply  the  circulation,  all  these  sums,  or  all  these  small  sums,  must  be 
kept  in  gold  and  silver,  and  consequently  must  absorb,  or  take  up  so  much 
of  the  real  capital  of  the  nation  ;  which  cannot  be  applied  to  any  other 
purpose,  because  it  is  wanted  for  these  daily  payments.  If  there  be  no 
Bank  bills  to  be  had  less  than  twenty  dollars,  all  sums  smaller  than  this 
amount,  must  be  kept  in  hard  money;  if  none  less  than  ten  dollars,  all 
smaller  than  this  must  remain  in  hard  money.  Suppose,  in  a  country  of 
ten  millions  of  inhabitants,  each  person  on  an  average,  to  have  five  dol- 
lars in  this  way,  some  may  have  none,  some  may  have  much  more  ;  but 
at  this  rate,  there  will  be  fifty  millions  of  dollars  real  capital,  taken  out  of 
the  trading  capital  of  the  country,  for  the  purposes  of  circulation  ;  and  thus 
kept  as  it  were  idle,  so  far  as  interest,  or  profit  is  concerned.  As  if  a  per- 
son had  one  hundred  dollars  in  his  pocket,  which  he  might  use  to  advan- 
tage were  it  his  own  ;  but  as  it  is  not,  he  says,  "  I  have  this  money,  it  is 
true,  but  I  cannot  use  it  because  I  have  to  pay  it  away  to-morrow,  or  next 
day."  So  it  is  with  these  fifty  millions  of  dollars  circulation,  it  is  all  mo- 
ney that  is  wanted  to  be  paid  away  to-morrow,  or  next  day,  and  therefore 
cannot  be  used  for  other  purposes. 

Now  suppose  a  sufficient  number  of  Banks  to  be  established  amongst 
these  ten  millions  of  persons  ;  each  of  them  goes  to  the  Bank  in  his 
neighborhood,  leaves  there  his  one,  two,  three,  five,  ten  or  twenty  dol- 
lars in  hard  money,  and  takes  out  the  small  bills  of  the  Bank  in  exchange. 
These  bills  answer  all  the  purposes  of  circulation,  to  which  the  hard 
money  was  before  applied,  while  the  whole  of  these  fifty  millions  of  dol- 
lars becomes  so  much  available  capital,  to  be  lent  out  by  these  Banks,  to 
those  who  need  it,  affording  an  interest  to  the  Bank,  and  a  profit  to  the 
borrowers.  This  too,  is  real  capital,  not  fictitious,  for  the  ten  dollars  in  the 
laborers  hands,  in  hard  money,  was  real  capital,  before  he  went  to  the 
Bank  with  it,  arid  that  hard  money  is  now  in  the  Bank.  The  Bank  bills 
given  to  the  laborer  in  exchange,  being  simply  so  many  orders  of  the 
Bank  on  itself,  for  the  same  amount  in  hard  money,  whenever  called  for. 
These  orders  pass  from  hand  to  hand,  with  more  safety  and  convenience 
than  specie,  while  the  hard  money  they  represent,  is  left  in  the  institution 
to  be  used  for  the  purposes  of  trade. 

The  smaller  the  bills  issued  by  the  Banks,  the  less  capital  will  be 
withdrawn  from  circulation,  and  the  more  capital  the  Banks  will  have  to 
lend  out.  If  there  be  no  Bank  bills  less  than  five  dollars,  all  the  small 
sums  under  this  denomination  will  be  withdrawn  from  trade  ;  and  per- 
haps the  want  of  small  bills  is  more  sensibly  felt  than  larger  ones  in  pro- 
portion, as  their  multitude  must  far  exceed  the  others.  Whether  more  or 
less,  however,  whatever  may  be  the  amount  of  hard  money  required  for 
circulation,  it  is  so  much  real  capital  withdrawn  from  trade,  and  not  yield- 
ing the  interest  and  profit  of  which  it  is  capable ;  consequently  it  is  so 
much  power  lost.  Parts  or  portions  of  a  dollar  in  hard  money,  we  know 
from  experience  are  indispensable,*  here  therefore,  of  two  evils,  we  must 

*  In  addition  to  this  we  may  remark,  that  the  fractional  parts  of  a  dollar  form 

3 


18 

choose  the  least ;  but  the  same  experience  teaches  us  that  a  paper  dollar, 
provided  there  be  no  ground  for  want  of  confidence  in  it,  is  as  convenient 
for  the  purposes  of  circulation  as  a  silver  one.  It  is  therefore,  an  im- 
portant consideration  that  every  hard  dollar  in  circulation,  capable  of 
being  represented  by  a  Bank  bill,  carries  with  it  the  loss  of  so  much  in- 
terest and  profit,  which  might  have  been  saved  to  the  country.  On  the 
other  hand,  as  capital  doubles  in  amount,  by  the  ordinary  process  of 
interest  alone,  in  the  course  of  ten  or  twelve  years,  we  may  form  some 
idea  of  the  immense  advantage  accruing  to  the  United  Sates,  for  example, 
by  the  invention  of  paper  money  circulation,  even  with  all  the  abuses 
to  which  it  has  been  subjected. 

SECTION  IV. 

Tendency  of  Banking  operations  to  expansion,  and  to  the  creation  of  fic- 
titious capital. 

We  have  now  seen  in  what  manner  a  Bank,  or  any  number  of  Banks, 
may  be  the  means  of  bringing  into  use,  in  three  different  ways,  that  real 
capital,  which  for  want  of  such  institutions  might  remain  unemployed  and 
unprofitable. 

We  say  real  capital,  for  to  this  their  operations  should  be  confined  ;  and 
it  is  important  to  keep  this  distinction  continually  in  mind. 

If  the  subscribers  to  a  Bank,  instead  of  contributing  the  amount  of  their 
shares  in  hard  money,  or  something  equivalent  to  hard  money,  and  capa- 
ble at  any  time  of  being  exchanged  for  it,  contribute  only  obligations  of 
no  value,  and  incapable  of  being  exchanged  for  any  amount  of  silver  or 
gold,  there  is  here  no  real  capital.  If  the  depositors  of  a  Bank,  place  in 
it  only  pieces  of  paper  or  orders,  never  to  be  complied  with,  because  there 
is  nothing  to  meet  them,  then  there  is  no  real  capital  here.  If  those  who 
obtain  the  bills  of  a  Bank,  give  nothing  in  return,  but  promises  never  to  be 
fulfilled,  there  is  here  also  no  real  capital.  Either  of  these  operations 
would  be  fraudulent,  and  it  is  hardly  possible  to  suppose  a  case,  in  which 
all  three  of  these  frauds  might  prove  to  have  been  perpetrated.  Such  an 
institution  could  hardly  exist  a  day,  but  even  if  it  did,  the  Banking  System 
in  the  proper  sense  of  the  term,  could  no  more  be  reproached  with  an 
abuse  of  this  kind,  than  the  East  India  islands  could  be  taken  to  task  for 
the  wooden  nutmegs  said  to  be  sometimes  disposed  of  for  real  spices. 

The  above  is  an  extreme  case,  there  may  be  others  in  which  more  or 
less  of  these  kinds  of  frauds  has  been  practiced,  either  intentionally  or  in 
'effect. 

Cases  of  intentional  fraud  may  be  rare,  but  as  far  as  the  creation  of  fic- 
titious capital  is  concerned,  the  operation  is  the  same,  whatever  the  inten- 
tion may  have  been. 

In  some  cases,  the  capital  of  a  Bank  may  be  partly  real,  and  partly, 
and  perhaps,  almost  entirely  fictitious.  It  may  have  been  made  up  of  the 
promissory  notes  of  individuals,  who  believed  themselves  able  to  pay,  but 
who  may  have  been  deceived  in  the  estimate  of  their  own  ability  ;  or  it 
may  have  been  made  up  of  mortgages  on  property,  supposed  to  have  been 

suras  so  small,  that  individuals  receive  them  without  sufficient  caution,  and  are  not 
sufficiently  vigilant  in  detecting  and  punishing  impositions.  The  public  therefore 
cannot  countenance  these  fractional  issues,  without  giving  encouragement  to  fraudu- 
lent attempts  on  the  currency. 


19 

of  sufficient  value  to  cover  such  mortgages,  when  perhaps  this  property 
has  been  previously  incumbered  with  other  mortgages  equal  to  its  full 
value.  Such  a  bank  may  go  into  operation,  it  may  receive  deposites,  and 
issue  its  bills  in  exchange  for  good  notes,  and  with  its  deposites,  and  the 
notes  paid  in  it  may  meet  its  bills  for  a  time  :  but  having  no  real  capital  of 
its  own,  it  will  be  embarrassed  as  soon  as  its  bills  come  in  before  the  notes, 
for  which  they  were  given  out  come  due  ;  and  this  especially,  if  its  de- 
positors, at  the  same  time  draw  out  a  large  part  of  their  funds. 

A  Bank  with  real  capital,  may  have  its  deposites  partly  real  and  partly 
fictitious  ;  that  is,  they  may  be  composed  partly  of  specie,  and  bills  of 
other  sound  Banks,  and  partly  of  bills  of  Banks  unable  to  pay  their  notes. 
When  this  is  the  case,  its  own  bills  so  far  as  they  represent  a  portion  of 
these  deposites,  represent  only  fictitious  capital,  and  the  Bank  becomes 
embarrassed,  or  looses  heavily  as  soon  as  it  is  required  to  pay  out  good 
money  in  return  for  the  fictitious  capital  previously  received  on  deposit. 

Again,  a  Bank  with  real  capital,  and  good  deposites,  may  give  out  its 
bills  in  exchange  for  promissory  notes,  at  first  to  be  esteemed  good,  but 
eventually  proving  to  be  of  no  value,  when  this  is  the  case,  every  bill 
put  into  circulation,  in  exchange  for  such  notes,  represents  only  so  much 
fictitious  capital.  Suppose  that  a  Bank  lend  out  the  whole  of  its  capital, 
deposites,  and  circulation  in  exchange  for  promissory  notes  of  persons 
more  or  less  unable  to  pay.  Just  in  proportion,  as  these  persons  are  un- 
able to  pay  their  notes,  the  issues  of  the  Bank  at  first  apparently  repre- 
senting real  capital,  will  eventually  represent  only  fictitious  capital. 

A  Bank  then  mus*t  not  only  be  sound,  and  go  into  operation  with  good  faith 
in  the  first  instance,  but  it  must  also  be  kept  in  this  condition.  Such  an 
institution,  conducted  in  the  ordinary  way,  without  supposing  the  intention 
of  fraud,  could  not  give  out  all  its  real  means  at  once,  in  exchange  for 
something  fictitious;  but  there  is  always  a  tendency  to  this  disasterous  re- 
sult, and  the  greater  the  number  of  Banks,  the  greater  this  tendency.  To 
wait  till  this  extreme  of  evil  is  reached,  must  be  folly.  The  longer  the 
tendency  in  view,  is  left  unchecked,  the  more  difficult  it  will  be  to  pro- 
vide a  remedy  ;  and  as  the  tendency  is  continually  acting,  the  remedy, 
whatever  it  be,  must  be  in  continual  operation. 

Banks  being  supposed  to  have,  money  at  all  times  to  lend,  there  is  a 
continual  pressure  upon  them,  by  those  who  want  money,  and  generally 
those  press  hardest,  who  are  to  be  trusted  with  most  caution.  At  other 
times  Banks  have  money  to  lend,  when  there  is  little  call  for  it.  The  di- 
rectors are  desirous  of  making  some  interest  for  the  Bank,  out  of  its 
funds,  and  this  desire,  leads  them  perhaps  to  place  the  amount  on  the  se- 
curity of  the  stocks  of  other  incorporated  institutions,  with  the  real  situa- 
tion of  which  they  are  unacquainted.  A  period  comes  when  money  again 
is  called  for,  and  it  is  then  found  that  these  stocks  cannot  be  exchanged 
for  money,  and  the  amount  lent  on  them,  or  a  great  part  of  them,  proves 
to  be  only  fictitious  capital.  Not  only  this,  when  the  Bank  is  called  upon  to 
pay  specie  for  its  bills,  it  must  go  back  to  the  notes,  and  securities  upon 
which  it  has  been  lending.  If  these  prove  to  be  worthless,  or  partially 
so,  the  stockholders  suffer  the  loss.  If  these  proceedings  continue  but 
a  short  time  the  evil  may  not  be  material ;  but  if  there  be  no  check  ;  if 
these  loans  have  been  made  as  if  pay-day  never  were  to  come  ;  the  stock- 
holder loses  his  all,  and  even  the  deposites  and  circulation  are  in  danger. 

Protection  therefore  against  the  creation  of  fictitious  capital  is  as  ne- 


20 

cessary  for  the  interests  of  every  shareholder  of  a  Bank,  as  it  is  for  the 
public  welfare. 

The  protection  of  every  Bank  against  the  insolvency  of  its  customers, 
is  to  be  found  only  in  a  constant  trial  of  their  ability  to  pay.  It  is  impos- 
sible for  the  directors  and  officers  of  a  Bank,  to  know  with  certainty  the 
circumstances  of  those  to  whom  they  lend  money ;  or  the  degree  of  con- 
fidence to  be  attached  to  the  securities  they  offer.  It  is  only  by  testing 
the  abilities  of  their  debtors,  and  by  testing  the  availability  of  their  secu- 
rities, that  the  Bank  can  have  confidence  in  them.  This  is  too  unpleasant 
a  task,  to  be  readily  undertaken  by  officers  and  directors.  Hence  the  ne- 
cessity of  some  arrangement  in  the  Banking  System,  making  it  absolutely 
necessary  for  every  Bank  to  be  on  the  watch,  that  it  does  not  trust  any 
one  too  far,  or  too  long.  If  a  bank  try  the  solvency  of  its  borrowers,  and 
test  the  nature  of  their  securities,  every  thirty  or  sixty  days,  a  tolerable  de- 
degree  of  information  may  be  obtained  of  its  own  real  situation  ;  but  if 
this  trial  be  procrastinated  for  six  or  eight  months,  the  information  requi- 
red, will  often  come  too  late ;  and  still  more  so  if  the  experiment  of  this 
test  be  further  postponed. 

The  tendency  in  the  management  of  all  Banking  Institutions,  is  to  pro- 
crastinate in  this  matter ;  and  experience  teaches  us,  that  unless  they 
themselves  are  tried,  they  will  not  try  those  upon"  whom  they  depend 
for  their  own  solvency.  If  Banks  be  not  subject  to  a  continual  test,  their 
customers  will  not  be  so  ;  and  just  in  proportion  to  the  want  of  this  test 
will  be  the  creation  of  fictitious  capital.  On  the  other  hand,  if  Banking 
Institutions  are  confined  to  their  lawful  and  proper  business  ;  if  in  pursuing 
this  business,  they  are  so  subject  to  have  their  own  solvency  tried  at  all 
times,  and  at  any  time,  that  they  must  unavoidably  make  as  continual  a 
trial  of  the  solvency  of  their  customers  ;  then,  whatever  may  be  their  num- 
ber, there  will  be  no  danger  of  the  creation  of  fictitious  capital.  The  cus- 
tomer will  not  give  out  his  note,  without  having  real  capital  to  which  he 
may  resort  for  the  payment  of  it ;  and  the  Bank  will  not  give  out  its  bills 
without  having  the  notes  of  customers  representing 'real  property,  upon 
which  it  may  fall  back  to  meet  its  own  engagements. 

This  kind  of  rigor  may  appear  odious,  but  it  is  necessary — necessary 
for  the  security  of  the  stockholders — necessary  for  the  protection  of  the 
bill  holders — necessary  to  protect  the  fair  dealer  upon  real  capital  from 
the  competition  of  the  unfair  dealer  upon  fictitious  capital — necessary  to 
secure  the  community  against  the  gradual  creation  of  an  artificial  value  in 
all  kinds  of  property, — eventually  resulting  in  a  period  of  public  distress 
and  ruin  ;  necessary  to  bring  into  activity  all  the  real  capital  to  be 
commanded  by  a  judicious  use  of  Banking  Institutions,  without  involving 
the  disasterous  consequences  of  an  abuse  of  them. 

The  lawful  and  proper  business  of  a  Bank,  is  simply  to  lend  out  the 
real  capital  collected  together  by  its  stock,  its  deposities,  and  its  circula- 
tion. It  cannot  even  use  all  its  deposites  with  safety  ;  nor  the  whole  of 
its  circulation ;  but  it  may  use  such  part  of  each,  as  experience  shows, 
will  not  probably  be  called  for — out  of  the  interest  on  the  monies  thus 
lent,  the  expenses  of  the  Bank  must  be  paid.  The  interest  received  on 
the  amount  of  deposites  and  circulation  loaned  out,  often  doing  little  more 
than  paying  the  expenses  of  the  Bank,  the  dividends  to  the  shareholders 
frequently  do  not  exceed  the  legal  rate  of  interest ;  enormous  profits  of 
Banking  business,  properly  so  called,  being  entirely  out  of  the  question. 
The  large  stockholder,  perhaps  receiving  no  more  interest,  than  if  he  had 


21 

lent  out  his  money  himself;  the  principle  advantage  being,  with  the  small 
share-holder,  who,  but  for  the  bank,  might  not  have  been  able  to  lend  his 
money  with  safety  at  all. 

Where  the  number  of  Banks  is  not  sufficient,  the  real  capital  to  be  com- 
manded will  not  be  all  taken  up  ;  many  who  might  use  it  to  advantage, 
will  not  be  able  to  procure  it,  and  many  who  have  it  unemployed,  will  not 
obtain  an  interest  for  it.  Where  there  are  too  many  Banks,  the  deposits 
and  circulation  will  be  so  much  divided,  that  the  interest  derived  from  the 
lending  of  these,  will  not  be  sufficient  to  pay  the  expenses  ;  and  the  stock- 
holders may  not  be  able  to  obtain  so  good  an  income  with  a  Bank,  as  they 
could  do  without  it.  In  either  of  these  cases,  the  evil  will  correct  itself. 
Where  spare  capital  is  unemployed,  there  will  be  a  desire  to  establish 
more  Banks ;  and  where  Bank  stock  does  not  afford  sufficient  dividend, 
this  desire  will  cease.  Such,  at  least,  is  the  case  where  all  banks  are  re- 
stricted to  their  proper  limits,  and  their  proper  business  ;  and  where  they 
are  judiciously  conducted,  and  confined  to  the  employment  of  real  capital 
only. 

But  Banks  are  often  got  up,  not  so  much  for  the  benefit  of  the  stock- 
holders, as  for  that  of  their  officers  and  directors.  The  officers  are  in  want 
of  places  and  salaries,  and  their  friends  do  what  they  can  to  serve  them. 
The  directors  want  the  opportunity  of  influencing  Bank  favors  for  them- 
selves and  others.  Hence  more  Banks  are  frequently  established  than 
the  circumstances  of  the  community  require.  When  this  is  the  case,  the 
proper  business  of  banking  is  not  sufficient  to  afford  a  satisfactory  dividend 
to  the  stockholders.  Here,,  then,  commences  the  inducement  for  an  in- 
stitution to  go  out  of  its  proper  sphere,  and  engage  in  other  operations  be- 
sides those  of  lending  its  bank  funds.  Large  stock  loans  are  made,  spec- 
ulations in  stocks  are  entered  into,  and  money  is  borrowed  on  one  stock  to 
lend  on  another,  with  the  view  of  making  a  small  per  centage  on  a  large 
transaction,  in  order  to  compensate  for  the  want  of  income  from  a  more 
regular  banking  business.  In  this  manner,  uncommon  profits  may  occa- 
sionally be  made;  and  undue  encouragement  may  occasionally  be  given 
to  the  establishment  of  a  greater  number  of  Banks  than  are  wanted.  But 
these  large  transactions  are  frequently  attended  with  heavy  losses,  and 
their  result  usually  shows  that  speculative  operations  are  not  to  be  entered 
into,  in  any  way,  by  banking  institutions  ;  the  interest  of  stockholders  being 
generally  sacrificed,  to  promote  the  private  views  and  interests  of  design- 
ing or  imprudent  individuals  possessing  a  certain  influence  in  the  manage- 
ment of  a  Bank. 

Bank  officers  and  directors,  although  generally  chosen,  as  we  may  sup- 
pose, for  their  integrity  of  character,  must  have  the  failings  of  men.  They 
may  be  influenced  not  only  by  a  regard  for  their  own  interest,  but  by  a 
regard  for  the  interests  and  opinions  of  others.  The  officers  must  please 
the  directors,  for  on  these  they  depend  for  their  appointments  and  salaries. 
They  must  be  popular,  too,  with  the  customers  of  the  Bank  ;  or  their  want 
ot  popularity  may  be  a  ground  of  their  removal.  The  directors  must  oblige 
each  other.  They  must  literally  do  as  they  would  be  done  by.  Their  time, 
too,  may  be  short ;  this  year  they  have  the  opportunity  of  serving  them- 
selves and  their  friends — next  year  the  management  may  be  in  other  hands. 
They  receive  no  other  compensation  for  their  services,  than  the  Bank  fa- 
cilities they  may  control ;  and  they  have,  besides  their  friends,  their  cus- 
tomers in  business  whose  means  they  wish  to  increase,  and  whose  credits 
it  is  their  desire  to  sustain.  As  a  general  rule,  therefore,  without  imply- 


22 

ing  any  censure,  we  may  lay  it  down  as  a  point  beyond  dispute,  that  the 
disposition  of  every  board  of  direction,  as  a  whole,  is  to  accommodate 
every  one  as  far  as  possible  ;  to  enlarge  the  issues  of  the  Bank;  to  increase 
its  circulation;  and  even,  as  it  were,  unwittingly  to  lend  on  security  less 
and  less  undoubted.  Every  Bank,  for  example,  desires  to  multiply  the 
number  of  its  depositors  ;  and  depositors  will  not  keep  their  accounts  at  a 
Bank  where  they  cannot  borrow  as  much  as  they  think  themselves  entitled 
to,  or  as  much  as  they  may  obtain  at  some  other  Bank.  Hence,  where 
there  is  more  than  one  Bank,  when  business  appears  profitable,  and  capital 
is  wanted,  there  is  a  competition  in  lending,  which  arises  from  the  general 
competition  for  depositors.  On  the  other  hand,  when  times  are  less  favor- 
able, prices  are  falling,  and  failures  are  apprehended,  every  influence  is 
employed  to  help  the  weak,  in  order  that  the  weak  may  be  enabled  to  pay 
the  debts  daily  coming  due,  and  to  enable  others  to  hold  their  property 
without  sacrificing,  till  prices  again  improve. 

It  is  easy  to  see  that,  under  such  circumstances,  unless  a  Bank  be  daily 
in  apprehension  of  some  immediate  and  certain  call,  to  test  its  own  ability, 
there  will  be  a  disposition  to  lend  more  and  more  ;  and  to  do  this  on  security 
not  always  of  the  safest  character.  What  is  true  of  one  Bank,  in  this  respect, 
is  equally  true  of  all ;  and  what  is  further  peculiar  to  the  case,  is  that,  al- 
though Banks  in  the  neighborhood  of  each  other,  are  competitiors  in  busi- 
ness, it  is  alike  the  interest  of  all  to  accommodate  each  other — to  show  to 
each  other  the  same  kind  of  indulgence  shown  by  each  to  its  several  cus- 
tomers. Suppose  in  a  community  of  twenty  Banks,  each  to  have  extended 
itself  in  the  manner  adverted  to,  till  each  feels  an  anxiety  with  regard  to 
the  solvency  of  a  large  part  of  its  debtors.  If  one  of  the  twenty  be  sud- 
denly and  urgently  pressed  by  the  others  to  pay  its  bills  in  hard  money, 
this  Bank  must  stop  its  usual  accommodations  ;  it  must  fall  back  upon  its 
customers,  and  call  in  its  loans.  Suppose  these  customers,  thus  suddenly 
tried,  to  stop  payment ;  they  not  only  owe  their  own  Bank,  but  they  owe 
other  Banks,  and  the  customers  of  other  Banks  ;  and  these  customers  of 
the  other  Banks,  being  disappointed  in  their  collections,  stop  payment  in 
consequence  of  the  stoppage  of  the  others.  The  nineteen  Banks  then  very 
soon  find  that  they  are  making  bad  debts  themselves,  by  what  may  have 
been  their  effort  to  test  the  strength  of  another  institution.  It  thus  becomes 
unavoidably  the  interest  of  the  twenty  Banks  to  sustain  each  other ;  and 
this  so  much  the  more,  as  they  may  have  all  committed  the  same  error. 
Not  one  of  them,  therefore,  would  willingly  be  the  instrument  of  causing 
a  shock  to  the  credit  of  the  community,  in  the  consequences  of  which  they 
must  all  materially  suffer. 

The  operation  will  be  the  same,  if  instead  of  twenty  Banks,  there  be  five 
hundred.  It  behooves  them  all  to  be  alike  indulgent  to  each  other :  and 
most  so,  when  the  state  of  credit  is  most  critical.  Thus,  as  the  tendency 
of  each  and  every  Bank  is  to  expand,  so  the  policy  of  all  banks  must  be  to 
countenance  and  sustain  each  other  in  this  expansion.  While,  then,  we 
perceive  that  something  is  necessary  continually  to  test  the  credit  and  sol- 
vency of  each  Bank  and  its  customers,  we  must  equally  perceive  that  this 
test  is  not  to  be  expected  from  the  voluntary  action  of  the  several  Banks 
on  each  other ;  and  that  especially  in  periods  when  it  is  most  required. 

In  the  preceding  cases,  we  have  supposed  only  honest  intentions  on 
the  part  of  all  Bank  officers  and  directors.  If  we  go  further,  and  suspect 
bad  intentions  in  any  of  them,  it  is  clear  that,  in  proportion  to  the  want  of 
honesty  and  honor  amongst  those  who  possess  so  great  a  degree  of  power, 


23 

the  evils  described  must  be  so  much  the  greater  :  and  the  check  required, 
so  much  the  more  indispensable. 

From  a  slight  knowledge  of  mankind,  we  are  easily  led  to  believe  that 
in  the  community  of  a  single  state,  where  there  are  forty  or  fifty  Banks, 
there  may  be  some  individuals  amongst  their  conductors,  not  sufficiently 
under  the  restraint  of  moral  and  honorable  principles.  There  may  be 
some,  even,  disposed  to  create  fictitious  securities, in  order,  on  the  strength 
of  them,  to  procure  available  funds  from  the  Banks  under  their  direction  ; 
and  there  may  be  others  disposed  to  turn  off,  upon  their  own  institutions, 
securities  in  their  own  hands,  already  known  to  be  worthless;  and  thus 
save  themselves  from  loss,  by  sacrificing  interests  which,  as  trustees,  they 
were  bound  in  honor  to  protect.  If  some  such  instances  may  occur  amongst 
the  forty  or  fifty  Banks  of  a  single  stale,  how  much  more  must  there  be  a 
probability  of  like  occurrences,  where  there  are  several  hundreds  of  these 
establishments,  spread  over  a  territory  of  thousands  of  miles  in  extent  ? 


SECTION  V. 
Operation  of  Bank  Expansion  upon  the  Currency. 

Having  noticed  the  tendency  to  expansion,  in  the  management  of  Bank- 
ing Institutions,  and  the  consequent  increase  in  amount  of  Bank  notes  in 
circulation,  let  us  now  attend  to  the  effect  of  these  particulars  upon  the 
value  of  the  Bank  notes  themselves,  or  upon  what  is  called  the  paper  cur- 
rency of  the  country. 

Wherever  Banks  are  established,  most  of  the  money,  in  sums  of  fifty 
or  one  hundred  dollars  and  upwards,  not  wanted  for  immediate  use,  is  de- 
posited in  a  Bank,  as  a  matter  of  safety  and  convenience.  In  addition  to 
this,  almost  every  one  having  a  promissory  note  of  another  person,  instead 
of  waiting  till  the  note  is  paid,  and  then  depositing  the  money  in  the  Bank, 
places  the  note  itself  in  the  Bank,  either  for  the  purpose  of  discount  or  of 
collection.  Thus  a  very  large  part  of  the  money  paid  in  such  a  commu- 
nity, is  paid  into  the  Banks.  Here,  then,  are  two  modes  in  which  the 
Banks  get  possession  alternately  of  the  Bank  bills  in  circulation — by  de- 
posits, and  by  the  payment  of  promissory  notes. 

The  shopkeeper  and  the  mechanic  collect  their  small  sums  together, 
till  they  get  sufficient  to  make  a  deposit,  or  to  pay  a  note.  In  these  col- 
lected sums,  they  have  the  bills  of  a  variety  of  Banks.  Accordingly, 
where  there  are  a  number  of  Banks  in  good  repute,  one  Bank  receives  in 
deposit,  or  in  payment  of  notes,  the  bills  of  several  other  Banks  ;  Bank 
A,  receiving  the  bills  of  Banks  B,  C,  D,  E,  &c.,  and  the  other  Banks 
receive  the  bills  of  Bank  A.  Each  Bank  enjoying  the  benefit  of  the 
interest  derived  from  the  circulation  of  its  bills,  while  they  are  in  posses- 
sion of  the  other  Banks,  as  much  as  if  they  were  in  the  pockets  of  those 
to  whom  the  money  was  originally  lent. 

If,  however,  Bank  A,  receive  more  of  the  bills  of  Bank  B,  than  B  re- 
ceives of  A's  bills,  the  balance  of  the  advantage  on  this  item,  is  against  A, 
and  if  A  continue  to  receive  and  retain  more  of  the  bills  of  each  of  the 
other  Banks,  than  they  have  of  A's  bills,  these  last  may  be  comparatively 
crowded  out  of  circulation  ;  in  which  case,  Bank  A  loses  the  interest  on 
that  portion  of  circulation  upon  which  it  depends  for  paying  the  expenses 
of  the  institution  ;  A's  bills  being  in  time  all  brought  in,  while  it  continues 


24 

to  hold  the  bills  of  other  Banks,  from  the  circulation  of  which  they  reap 
the  benefit.  Hence,  independent  of  any  want  of  confidence,  it  becomes 
the  interest  of  each  Bank,  to  balance  its  accounts  with  the  other  Banks — 

A,  sending  back  B's  bills,  and  receiving  its  own  in  exchange,  and  requiring 
the  difference,  if  any,  to  be  paid  in  specie  ;  and  so  with  the  others.    Thus, 
as  a  mere  matter  of  interest,  the  Banks,  as  far  as  practicable,  check  each 
other  ;  and  this  of  course,  much  more,  where  there  is  a  want  of  confidence. 

This  check,  however,  dictated  by  interest  and  prudence,  is  not  always 
practicable.  Where  there  are  a  number  of  Banks  in  the  immediate  vicin- 
ity of  each  other,  it  may  not  be  necessary  for  each  to  call  upon  the  other 
.for  its  balance  in  specie,  because  what  B  may  owe  A,  C  may  again  owe 

B,  and  A  may  owe  C  ;  so  that  by  passing  checks,  or  orders,  one  on  the 
other,  the  difference  may  be  finally  adjusted,  with  a  very  small  payment  in 
hard  money. 

If  all  the  Banks,  too,  be  within  a  convenient  distance  of  each  other,  as 
they  are  in  cities,  this  balancing  of  accounts  is  very  easily  performed,  and 
may  be  effected  every  day.  Then,  daily  checking  each  other,  neither  will 
go  to  any  great  excess  in  its  issues,  unless  circumstances  are  such  as  to 
induce  all  of  them  to  adopt  a  system  of  indulgence  ;  in  which  case,  they 
may  all  exceed  their  proper  limits,  charging  each  other  interest  on  balances 
instead  of  requiring  immediate  payment,  But  in  proportion  as  Banks  are 
at  a  greater  distance  from  each  other,  more  time  is  required,  and  more 
risk  and  expense  incured,  in  effecting  these  exchanges. 

If  city  Banks  receive  the  bills  of  distant  countr)'-  Banks,  whether  they 
effect  this  exchange  themselves,  or  whether  they  do  it  through  a  person 
who  applies  himself  to  this  kind  of  business,  they  must  suffer  a  degree  of 
loss  in  proportion  to  the  time,  risk  and  expense,  already  spoken  of.  As 
soon,  then,  as  the  city  Banks  find  that  this  loss  is  as  great,  or  greater,  than 
the  gain  of  interest  made  by  the  transactions  proposed,  they  will  refuse  to 
receive  these  bills.  The  parties  having  them,  are  then  obliged  to  get  them 
exchanged  by  paying  something  equal  to  the  loss  of  time,  risk  and  expense, 
alluded  to.  Here,  then,  commences  the  difference  between  the  value  of 
the  bills  of  distant  Banks,  and  those  of  the  city  Banks.  The  process  is 
the  same  with  regard  to  the  bills  of  the  Banks  of  different  states.  The 
Banks  of  one  state  cannot  take  those  of  a  distant  state,  if  the  loss  of  time, 
risk  and  expense,  required  to  exchange  them,  be  so  great  as  to  counter- 
balance the  interest  it  derives  from  making  loans. 

The  difference  in  the  value  of  Bank  bills,  whether  between  those  of  the 
city  and  country,  or  between  those  of  one  state  and  of  another  state,  must 
depend  upon  a  variety  of  circumstances.  The  distance,  the  means  of 
communication,  the  reputation  of  the  distant  Bank,  and  the  opportunity 
there  may  be  of  using  its  bills  at  any  intermediate  point.  In  some  cases, 
Banks  may  take  the  bills  of  distant  institutions  at  a  lower  rate.  They  may 
collect,  as  it  is  called,  on  other  places  ;  but  the  result  is  the  same  ;  they 
must  make  as  much  difference  in  the  rate,  as  it  will  cost  them  to  effect  the 
exchange  ;  taking  the  time  and  risk,  as  well  as  the  actual  expense,  into 
view.  In  general,  a  dealer  in  bills,  or  money  changer,  will  be  able  to  ef- 
fect the  exchange,  to  a  limited  extent,  better  than  a  State  Bank ;  as  his 
whole  attention  is  applied  to  the  business,  he  may  have  his  agencies  at 
certain  points,  and  one  dealer  may  collect  for  several  institutions,  and  in- 
dividuals at  the  same  time,  which  will  make  the  expense  fall  so  much 
lighter  on  the  whole.  Whether  the  difference,  however,  be  charged  by 
the  Bank,  or  by  a  dealer  in  Bank  bills,  it  constitutes  what  is  called  the 


25 

rate  of  exchange;  and  whatever  it  may  be,  it  is  always  less  than  it  would 
cost  individuals,  if  every  person  undertook  to  effect  the  exchange  of  his 
own  money. 

Suppose,  for  example,  a  mechanic  to  receive  one  hundred  dollars  in 
bills  of  distant  Banks — a  dealer  in  these  bills  may  exchange  them  for  one 
per  cent.,  which  is  one  dollar  only ;  whereas  if  the  mechanic  undertake  to 
effect  the  same  exchange  himself,  he  must  leave  his  work,  he  must  pay 
his  travelling  expenses,  he  must  lose  the  interest  of  the  money  till  it  is 
exchanged,  and  he  must  incur  the  risk  of  losing  it  on  the  way.  If,  then, 
he  have  to  pay  this  money  into  the  Bank,  his  best  and  only  course  is  to 
pay  the  difference  of  exchange.  So  it  is  with  every  dealer  or  trader. 
Whatever  may  be  said  of  the  loss  by  exchange,  it  is,  even  in  the  best 
times,  the  unavoidable  consequence  of  the  distance  and  difficulty  of  com- 
munication between  Banks  of  different  cities  or  states  ;  and  the  loss  of 
time,  risk  and  expense,  attendant  on  effecting  these  exchanges.  The 
dealers,  who  devote  themselves  to  the  business  of  exchanging  paper  money, 
as  far  as  they  are  able,  perform  a  benefit  to  the  community,  and  in  some 
measure  mitigate  the  evil ;  the  point  of  enquiry,  however,  is  whether  this 
evil  may  not  be  still  more  mitigated,  and  a  still  better  remedy  provided. 

We  have  now  seen  that  Banks,  under  the  most  favorable  circumstances, 
cannot  receive  the  bills  of  distant  institutions,  when  the  loss  incident  to 
exchanging  them  would  be  too  great ;  and  that  they  cannot  retain  these 
bills  without  losing  the  benefit  of  their  own  circulation.  The  operation 
being  the  same  as  that  of  a  man's  paying  all  his  own  notes,  without  calling 
upon  others  to  pay  the  notes  which  he  holds  of  theirs.  Consequently, 
however  fairly  and  judiciously  Banks  may  be  conducted,  a  difference  of 
exchange — in  other  words,  a  comparative  depreciation  in  the  value  of 
Bank  bills — must  exist ;  and  this  in  proportion  to  the  difficulties  of  commu- 
nication between  the  several  institutions  from  which  these  bills  originate. 

Let  us  now  suppose  that  some  Banks  are  not  so  well  conducted  as  oth- 
ers, or  rather  as  they  should  be.  Some  of  them,  for  instance,  cause  their 
bills  to  be  circulated  in  distant  parts  of  the  country,  purposely,  that  a  con- 
siderable period  of  time  may  elapse  before  they  can  be  brought  back  to 
their  own  Bank  for  specie.  Some  of  them  lend  their  money  on  doubtful 
security,  perhaps  on  condition  that  they  shall  be  thus  circulated.  Some 
venture  to  issue  more  of  their  bills  in  loans  than  it  is  prudent  for  them  to 
give  out ;  some  are  on  the  verge  of  insolvency,  and  some  are  actually  un- 
able to  pay  the  notes  they  have  out,  and  would  be  obliged  to  stop  payment 
if  a  large  claim  were  at  any  time  to  be  made  upon  them.  The  real  cir- 
cumstances of  such  Banks  are  rarely  known.  In  some  cases  secrecy  is 
purposely  observed  :  in  others  there  may  be  a  difficulty  of  obtaining  intel- 
ligence, on  account  of  the  distance,  or  other  circumstances.  In  some 
cases  public  suspicions  may  go  beyond  the  truth  ;  in  others  it  may  hardly 
anticipate  the  evil  sufficiently.  In  all  these  cases,  however,  the  hazard 
of  dealing  in  the  bills  is  increased,  or  supposed  to  be  increased.  Even 
sound  institutions  suffer  in  their  reputation,  in  consequence  of  the  mis- 
management of  others.  Here,  then,  want  of  confidence  comes  in  to  add 
to  the  difference  of  exchange,  or  depreciation  of  value  arising  from  natural 
causes. 

There  is,  therefore,  ample  foundation  for  a  considerable  difference  be- 
tween the  value  of  the  bills  even  of  Banks  of  the  same  state,  where  all 
the  institutions  are  under  the  same  state  government,  and  where  the  great- 
est distance  between  any  of  them  does  not  exceed  two  or  three  hundred 

4 


26 

miles.  How  much  greater  must  be  this  depreciation  where  the  compara- 
tive value  of  the  bills  of  Banks  of  twenty -six  different  states,  under  dis- 
tinct governments,  subject  to  different  regulations,  and  some  of  them  1500 
or  2000  miles  apart  from  the  others. 

How  much  greater  must  be  the  difficulty  here,  in  effecting  frequent  ex- 
changes ;  in  bringing  home  to  each  Bank  the  excess  of  its  bills  in  circu- 
lation ;  and  of  judging  of  all  the  uncertainties  attending  the  exchanging  of 
its  paper.  If  the  difference  between  the  value  of  the  bills  of  different 
banks,  and  between  the  circumstances  of  different  sections  of  the  country, 
were  always  the  same,  the  inconvenience  would  not  be  so  great.  But  so 
long  as  the  exchange  of  bills  cannot  be  effected  rapidly,  there  must  be  a 
corresponding  uncertainty  as  to  what  may  take  place,  between  the  time 
when  a  bill  is  received,  and  the  time  when  it  may  be  exchanged  for  spe- 
cie, or  the  value  of  specie.  This  is  the  case  even  in  cash  transactions  ; 
how  much  more  must  it  be  so  where  sales  are  effected  on  credit.  A  mer- 
chant in  the  city  of  New  York,  selling  to  a  merchant  in  Buffalo,  at  six 
months' credit,  not  merely  taking  the  risk  of  the  difference  between  Buffalo 
money  and  city  money  at  the  time  of  sale,  but  also  the  risk  of  what  it  may 
be  six  months  afterwards  ;  and  another  selling  to  a  merchant  in  Georgia  or 
Alabama,  whatever  the  loss  in  exchange  may  be  at  the  time,  hazarding  the 
still  greater  depreciation  to  be  apprehended  when  his  sale  becomes  due. 

We  see,  then,  that  in  proportion  to  the  relative  excess  in  the  expansion 
of  Bank  issues,  from  the  moment  that  one  Bank  cannot  take  the  bills  of 
another  Bank,  there  will  be  a  corresponding  difference  of  exchange,  and  a 
comparative  depreciation  of  currency. 


SECTION  VL 

Effects  of  a  Depreciation  of  the  Currency. 

Having  noticed  the  causes  unavoidably  producing  a  difference,  or  de- 
preciation in  the  comparative  value  of  Bank  bills,  let  us  now  observe  upon 
whom,  and  upon  what,  the  consequence  of  such  depreciation  falls. 

Whatever  be  the  cost  of  exchanging  money,  it  must  eventually  be  paid 
by  the  consumer.  He  has  to  pay  at  last  for  the  loss  of  time,  the  expense, 
the  actual  hazard,  and  the  supposed  hazard,  or  apprehension  of  hazard, 
incured  in  all  the  money  transactions  connected  with  the  purchase  of  the 
goods  he  consumes.  The  New  York  merchant,  in  selling  to  the  Buffalo 
or  Alabama  merchant,  must  sell  at  a  price  sufficient  to  cover  all  the  loss 
he  incurs,  or  is  apprehensive  of  incuring,  from  the  depreciation  of  the 
money  he  receives,  or  is  to  receive,  in  payment  for  his  merchandise.  Or, 
if  the  Buffalo  or  Alabama  merchant  pay  for  his  purchases  in  hard  money, 
he  must  be  compensated  for  the  same  cost  arid  hazard.  If  the  danger 
apprehended  be  not  so  great  as  was  supposed,  the  intermediate  trader, 
having  taken  the  risk,  may  gain  by  it ;  but  the  consumer  has  to  pay  not 
only  for  the  real,  but  for  the  supposed,  hazard.  The  consumer,  in  fine, 
sustains  the  burthen  of  all  want  of  confidence,  as  well  as  every  other 
charge,  intervening  between  the  producer  of  the  goods  and  himself.  At 
the  same  time,  the  seller  of  goods,  and  even  the  money  changer,  may  lose 
more  than  he  anticipates.  If  a  depreciated  currency  be  stationary,  the 
evil  is  not  so  great,  but  all  must  suffer  inconvenience  from  the  instability 


27 

of  a  continually  depreciating  currency  ;  and  this  inconvenience  must  at 
last  be  paid  for  in  the  price  of  every  article  of  necessity,  comfort  or 
luxury. 

Add  to  this,  in  what  may  be  called  the  home  circulation,  the  mechanic, 
fanner,  and  laborer,  suffer  most  from  this  depreciation  of  Bank  paper. 
Wherever  a  difference  in  the  value  of  Bank  bills  exist,  there  will  be  two 
currencies  ;  one  that  of  bankable  money,  as  it  is  called,  and  the  other  of 
that  which  is  not  bankable.  The  latter,  as  we  well  know,  although  not 
receivable  at  the  Bank,  will  be  applied  to  almost  all  other  payments :  that 
is,  within  a  certain  limit  of  depreciation.  In  many  cases,  the  best  Bank 
bills  will  be  exchanged  for  those  of  an  inferior  character,  expressly  for 
the  purpose  of  paying  debts  not  due  to  a  Bank.  As  a  general  practice, 
we  find  that,  whenever  the  bills  of  distant  solvent  Banks  can  be  procured 
at  a  cheaper  rate  than  the  bills  of  nearer  Banks,  the  worst  bills,  or  what 
we  call  the  out  of  town  bills,  will  take  the  place  of  the  best  bills  ;  and 
will  generally  be  used  in  payment  of  the  laboring  classes.  The  shop- 
keepert  the  butcher,  and  the  baker,  can  compensate  themselves  for  the 
loss  on  these  bills,  by  adding  to  the  price  of  what  they  sell ;  but  the  la- 
borer cannot  raise  the  price  of  his  day's  work,  to  meet  the  depreciation  of 
the  paper  dollar  with  which  he  is  paid  ;  although  he  experiences  the  effect 
of  this  depreciation  in  the  price  of  every  article  of  food  or  clothing  of  which 
he  stands  in  need.  While,  then,  the  whole  body  of  the  community  have 
an  interest,  as  consumers,  in  maintaining  the  stability  and  uniformity  of 
the  currency,  the  laboring  classes  have  a  double  interest  in  attaining  the 
same  object. 

There  being,  under  the  circumstances  supposed,  two  kinds  of  money  in 
circulation — one  which  the  Banks  will  receive,  and  one  which  they  will 
not  receive — it  follows,  that  all  of  the  description  not  so  received,  will  re- 
main in  the  pockets,  trunks  or  drawers,  of  those  to  whom  it  belongs,  as  so 
much  idle  capital.  It  will  be,  in  this  respect,  with  regard  to  this  kind  of 
money,  as  if  there  were  no  Banks.  The  amount  of  deposits  in  the  Banks 
will  be  so  much  less,  and  so  much  power  in  capital  will  be  lost.  Hence, 
the  greater  the  abundance  of  money  in  circulation  not  bankable,  the  greater 
may  be  the  complaints  of  the  scarcity  of  money  in  trade  :  and  hence  an 
interest  which  every  community  has  in  equalizing  the  currency.  For  if  all 
money  be  bankable,  all  except  what  is  wanted  for  daily  use,  will  be  depo- 
sited ;  and  the  greater  the  amount  of  bank  deposits,  the  more  money  these 
institutions  will  h'ave  to  lend  out,  and  the  more  real  capital  will  be  brought 
into  activity. 

The  circulation,  therefore,  of  bills  of  distant  Banks,  in  any  city  or  town 
where  these  bills  cannot  be  taken  by  the  Banks  of  that  place,  diminishes 
its  trading  capital  in  two  ways  :  First,  by  depriving  these  Banks  of  such 
a  proportion  of  their  means  as  might  be  derived  from  the  circulation  of 
their  own  bills  ;  and  secondly,  by  reducing  the  average  amount  of  their 
deposits.  It  may  be  said,  indeed,  that  all  Banks  may  take  the  same  liberty ; 
that  the  Banks  of  the  East  may  circulate  their  bills  at  the  West,  and  those 
of  the  West  do  the  same  at  the  East ;  and  so  with  the  Banks  of  the  North 
and  South.  But  this  mutual  invasion  of  each  other's  territory,  as  far  as 
deposits  are  concerned,  increases  the  mischief,  as  it  places  in  each  district 
so  much  undepo sit  able  money,  in  the  place  of  that  which  might  have  been 
deposited.  And  these  efforts  at  distant  circulation  are  always  of  the  sche- 
ming order,  and  especially  to  be  discountenanced  ;  they  are  indications  of 
weakness,  and  grounds  of  distrust ;  they  must  result  in  a  depreciation  of 


28 

the  bills  circulated,  and  in  augmenting  that  instability  of  the  currency 
against  which  it  is  so  desirable  to  provide.  Any  arrangement,  then,  tend- 
ing to  keep  the  bills  of  all  Banking  Institutions  within  their  respestive  vi- 
cinities, must,  in  its  operation,  be  most  unquestionably  equitable,  and  best 
calculated  to  promote  and  to  secure  the  convenience  and  prosperity  of  the 
public.  Such  an  arrangement  gives  to  each  institution  all  its  just  rights 
and  privileges,  while  it  guaranties  to  those  well  and  properly  conducted, 
the  benefit  to  be  derived  from  that  public  confidence  to  which  they  are 
entitled. 

Such  being  the  consequences  of  a  depreciated  paper  currency,  as  far  as 
the  general  welfare  is  effected  by  them,  particularly  in  their  bearing  upon 
the  consumer,  and  upon  the  laboring  classes,  and  upon  the  amount  of 
available  capital — let  us  now  look  at  the  operation  of  such  a  state  of  the 
currency,  in  the  collection  of  the  public  revenue. 

We  have  seen  the  tendency  to  increase,  in  the  issues  of  all  bank  pa- 
per, if  unchecked,  even  when  the  banks  themselves  are  well  conducted, 
and  still  more  when  they  are  badly  managed.  We  have  seen  the  una- 
voidable difference  in  the  value  of  bank  bills,  arising  from  the  loss  of  time, 
expense,  and  hazard  incident  to  exchanging  them,  and  we  have  seen  how 
much  this  difference  may  be  increased  by  any  knowledge,  or  suspicion, 
of  mismanagement  on  the  part  of  those  who  conduct  these  corporations  ; 
not  only,  too,  suspicions  of  what  may  have  occured,  but  apprehensions  of 
what  may  occur  at  some  future  period. 

From  what  has  been  stated,  it  is  evident  that  in  an  extensive  country, 
like  that  of  the  United  States,  with  twenty-six  independent  state  govern- 
ments, the  circumstances  occasioning  a  difference  in  the  comparative  val- 
ue of  bank  bills,  may  vary  essentially  in  different  sections,  and  in  different 
states.  The  rate  of  depreciation  in  bills  of  these  sections  and  states,  of 
course  will  vary  according  to  these  circumstances  ;  especially  as  in  those 
sections  of  the  country  in  which  capital  is  most  wanted,  there  will  be  the 
greatest  tendency  to  excessive  issues,  and  of  course  less  of  this  tendency 
in  sections  where  capital  is  more  abundant.  Accordingly,  in  one  section, 
the  bank  paper  dollar  may  be  equal  to  a  hard  dollar  ;  in  another  it  may 
not  be  equal  to  more  than  ninety-five,  ninety-six  or  ninety-seven  cents 
hard  money.  In  other  sections,  it  may  be  as  low  as  ninety  cents  ;  and 
if  we  suppose  the  banking  business  of  any  particular  section  to  be  very 
loosely  conducted,  the  bills  of  that  part  of  the  country  may  not  be  worth 
more  than  seventy-five  or  eighty  cents  in  specie. 

Now  suppose  one  citizen  imports  goods  in  a  section  of  the  country 
where  the  bank  bills  are  equal  to  specie.  He  pays  duties  on  these  goods 
at  the  rate  of  one  hundred  cents  the  dollar,  hard  money.  Suppose  anoth- 
er to  import  the  same  goods  in  a  district  where  the  paper  money  is  only 
equal  to  ninety-five  or  ninety  cents  hard  money.  Here,  this  last  citizen 
pays  five  or  ten  per  cent,  less  duty  than  the  other.  So,  if  one  purchase 
public  lands,  to  pay,  as  in  the  first  case,  bank  bills  equal  to  specie,  and 
another,  in  another  state,  pay  for  his  lands  in  bills  worth  only  ninety  cents 
in  specie,  the  citizen  of  one  state  would  not  pay  so  much  for  the  public 
lands,  as  the  citizen  of  another.  In  these  cases,  although  the  duty, 
and  price,  be  nominally  the  same,  the  citizens  of  different  sections 
actually  pay  different  rates.  One  indeed  may  be  able,  for  this  reason 
alone,  to  sell  the  same  kind  of  goods,  or  the  same  lands,  at  a  profit,  when 
another  could  not  do  it  without  loss.  This  mode  of  collecting  the  revenue, 
it  is  evident,  is  unequal  and  unfair.  Not  only  so ;  it  is  expressly  in  vio- 


29 

lation  of  a  provision  of  the  national  constitution,  which  requires  that  "  all 
duties,  imports,  and  excises,  shall  be  uniform  throughout  the  United 
States." 

The  unavoidable  tendency,  then,  of  the  issues  of  all  State  Banks, 
throughout  the  Union,  if  unchecked,  is  to  produce  unequal  values  of  bank 
paper,  in  different  sections  of  the  country  ;  and  the  unavoidable  conse- 
quence of  these  unequal  values,  must  be,  that  the  public  burthens,  if 
payment  be  collected  in  bank  bills,  will  not  be  uniform  throughout  the 
several  states. 

It  follows,  then,  that  the  national  government  must  either  collect  all  its 
dues  in  hard  money,  or  else  it  must  establish  some  institution,  by  the 
operation  of  which  all  the  issues  of  the  various  State  Banks  will  be  so 
checked,  that  their  bills  in  every  section  of  the  country  will  be  of  the 
same  value — that  is,  will  be  always  at  the  par  of  specie,  or  within  a  very 
small  fraction  of  it. 

If  there  be  no  such  institution,  as  the  provision  of  the  constitution,  as  well 
as  the  plain  principles  of  equity,  cannot  be  violated.  The  government  must 
collect  its  dues  in  hard  money,  or  the  full  value  thereof.  It  cannot  receive 
bills  of  Banks  not  worth  one  hundred  cents  to  the  dollar  in  specie,  for  the 
reason  already  given,  nor,  if  this  reason  were  set  aside,  could  it  receive 
depreciated  paper  money,  and  suffer  the  country  to  lose  the  difference  be- 
tween the  value  of  that  paper,  and  that  of  gold  or  silver.  If  it  receive  its 
dues  in  specie,  or  the  full  value  thereof,  it  must  also  pay  out  specie  or  the 
value  thereof.  The  consequence  must  be  then,  that,  if  all  the  receipts 
and  payments  of  the  government  be  in  specie,  there  will  be  so  much  less 
amount  of  Bank  bills  in  circulation,  at  least  in  all  those  portions  of  the 
country  where  these  bills  are  not  equal  to  the  par  of  hard  money.  Thence 
results  a  loss  to  the  country  of  so  much  power  in  capital. 

We  have  seen  that  every  dollar  of  Bank  money  represents,  or  should 
represent  a  hard  dollar,  which  is  left  in  the  Bank  in  lieu  of  it,  and  that  this 
hard  dollar  is  so  much  capital  which  the  Bank  has  the  faculty  of  lending  out 
for  the  purposes  of  trade.  Of  course  every  paper  dollar  received,  and  paid 
by  the  government,  saves  the  use  of  a  hard  dollar,  the  same  as  in  the 
transactions  of  individuals.  If  the  whole  amount  of  the  money  received 
and  paid  by  the  government,  be  in  Bank  bills,  then  the  use  of  this  amount 
in  hard  money  is  saved,  leaving  it  in  the  possession  of  the  Banks,  to  be 
lent  out  as  capital. 

If  on  the  contrary,  the  government  resort  to  a  system  of  receipts  and 
payments,  in  hard  money  only,  it  withdraws  from  circulation,  an  amount 
of  Bank  bills  equal  to  the  average  amount  of  these  receipts  and  payments 
as  they  are  continually  going  on,  requiring  from  the  Banks  the  same 
amount  in  specie  :  perhaps  several  millions  of  dollars.  But  whether 
more  or  less,  in  the  mode  described,  crippling  the  Banks,  at  the  mo- 
ment of  the  withdrawal,  and  so  long  as  the  system  continues,  depriving 
the  country  of  the  use  of  the  capital  to  be  derived  from  what  may  be  call- 
ed the  government  portion  of  the  circulation  :  a  disadvantage,  too,  suffered 
most  in  those  sections  where  the  want  of  capital  is  most  experienced. 

This  is  not  all,  as  the  dues  of  government  cannot  be  collected  in  Bank 
bills  on  account  of  their  depreciation,  so  neither  can  they  be  mixed,  after 
collection,  with  this  kind  of  money.  The  government  agents  cannot  de- 
posit hard  money  in  a  bank,  and  take  out  bills  of  less  value  than  the  hard 
money,  without  actually  conniving  at  a  fraud.  Hence,  in  those  sections 
where  every  Bank  dollar  is  not  worth  its  face  in  specie,  the  money  of 


30 

government  would  be  kept  separate  from  the  money  of  the  Banks.  The 
Banks  then  can  no  longer  enjoy  any  advantage  from  government  depo- 
sits ;  and  consequently  the  country  loses  all  that  power  in  capital,  to  be 
derived  from  the  use  of  these  deposits,  when,  through  a  Bank,  or  Banks, 
they  are  lent  for  the  purposes  of  trade. 

We  have  seen  that  the  various  sums  deposited  by  individuals,  in  the 
Banks,  constitute  an  average  amount,  to  be  applied  by  the  Banks  on  their 
own  responsibility,  to  the  wants  of  borrowers.  So  the  average  amount  of 
public  deposits,  if  in  Bank,  constitute  a  capital  of  some  millions,  in  like 
manner,  to  be  discounted  upon  for  the  benefit  of  the  trading  community, 
the  whole  capital  of  the  Bank  being  held  responsible  to  the  government 
for  the  amount  thus  loaned. 

Suppose  all  the  individuals  of  any  given  section  of  the  country,  to  with- 
draw their  deposits  from  the  Banks,  we  may  easily  conceive  how  much 
the  power  of  those  Banks  to  aid  their  customers,  must  be  diminished. 
The  operation  will  be  the  same  if  the  government,  instead  of  leaving  its 
money  in  a  way  to  be  loaned  out,  lock  it  up  in  safes  and  vaults  in  specie, 
such,  however,  must  be  the  unavoidable  consequence  of  the  depreciation 
of  bank  bills,  and  of  the  instability  of  a  paper  currency.  Wherever  these 
exist,  the  revenue  cannot  be  fairly  and  safely  collected  and  preserved, 
without  an  entire  separation  of  the  public  moneys  from  those  employed  in 
the  ordinary  transactions  of  business. 

Nor  will  this  precaution  be  confined  to  the  money  operations  of  govern- 
ment alone.  No  one  will  put  a  quantity  of  silver  and  gold  into  a  Bank  to 
receive  in  return  bills,  not  capable  of  commanding  an  equal  quantity  of 
hard  money.  When  bank  bills  are  considerably  below  par,  every  indi- 
vidual, as  we  have  noticed  in  speaking  of  two  currencies,  keeps  his  silver 
and  gold  in  his  own  possession,  withdrawing  so  much  real  capital  from 
the  purposes  of  trade.  In  other  words,  silver  and  gold,  as  is  well  known, 
is  hoarded  and  secreted  in  proportion  as  public  confidence  in  bank  paper  is 
shaken. 

On  the  same  principle,  in  a  country  where  the  currency  is  unstable  and 
depreciated  no  foreign  capital  will  remain.  The  merchant  or  banker  of 
Europe,  dare  not  allow  his  money  to  remain  in  America  in  dollars  and 
cents  of  account,  if  he  fear  that  the  dollar  of  to-morrow  will  not  be  worth 
so  much  as  the  dollar  of  to-day.  He  may  send  his  goods  here  to  be 
sold,  but  he  will  not  allow  the  amount  to  remain,  he  gets  it  home  as  soon 
as  he  can.  He  can  leave  nothing  in  American  money  that  is,  repre- 
sented by  Bank  money :  for  he  says,  "  the  currency  of  that  country  is 
growing  worse  and  worse." 

Even  the  American  merchant  himself  feels  the  panic.  He  will  not 
keep  his  capital  at  home,  in  any  thing  represented  by  the  currency  of  his 
own  country.  So  long  as  the  Bank  currency  around  him  is  depreciating,  and 
continually  depreciating,  he  places  his  funds  elsewhere,  if  it  be  only  for 
safe  keeping. 

Thus,  with  loss  of  confidence  in  bank  paper,  real  capital  takes  flight 
in  all  directions ;  and  the  evil  is  continually  augmenting  itself. 

To  supply  the  absence  of  real  capital,  fictitious  capital  is  created. 
Banks,  in  some  instances,  borrow  that  which  is  real,  but  they  give  their 
own  doubtful  obligations  in  exchange ;  and  the  evil  consequences  of  the 
fiction  is  thus  shifted  from  one  shoulder  to  another.  In  other  instances, 
they  may  borrow,  as  they  say,  only  the  credit  of  the  state,  in  exchange  for 
the  same  kind  of  obligations;  but  the  citizens  find  when  it  is  too  late,  that  they 


31 

must  furnish,  in  the  shape  of  taxes,  the  real  capital  which  the  State  has 
obliged  itself  to  give  away  in  payment  for  the  fictitious  capital  thus  impo- 
sed upon  it. 

Here,  then  are  the  consequences  of  an  unstable  and  depreciated  state 
of  Bank  currency.  The  consumer  suffers  in  the  increased  price  of  every 
article  he  purchases.  The  laboring  classes  suffer  yet  more  by  their  ina- 
bility to  raise  the  price  of  labor,  in  proportion  to  the  rise  in  price  of  articles 
of  consumption.  The  revenue  must  be  collected  and  preserved  in  hard 
money,  causing  a  loss  of  power  in  the  use  of  the  capital  to  be  drawn  from 
government  deposits  and  government  circulation.  Private  citizens  with- 
draw their  hard  money  from  the  Banks,  and  consequently  from  the  purpo- 
ses of  trade.  Foreigners  also  withdraw  their  capital  from  the  country, 
and  even  the  capitalist  at  home,  places  his  funds  abroad  for  safe  keeping. 
Fictitious  capital  is  substituted  for  real.  State  credit  is  brought  in  to  sus- 
tain this  fictitious  capital ;  and  the  citizen  at  last  is  obliged  to  furnish  in 
the  shape  of  taxes,  the  real  capital,  for  which,  this  State  credit  has  been 
pledged  in  exchange  for  what  eventually  proves  itself  valueless.* 


PART    SECOND. 


THE  REMEDY. 

SECTION  I. 

Advantages  of  a  National  Bank. 

We  have  now  had  before  us  the  use,  and  the  abuse,  of  what  is  com- 
monly called  the  Banking  System  of  the  United  States.  That  is,  the 
operation  of  the  Banks  of  the  several  states,  without  any  reference  to  their 
connection  with  a  national  institution. 

On  the  one  hand,  we  have  the  important  advantages  derived  from  the 
immense  amount  of  real  capital,  brought  into  activity  through  the  instru- 
mentality of  the  stocks,  the  deposits,  and  the  circulation  of  the  local  or 

*  To  this  we  may  add  the  effect  of  fictitious  capital  upon  the  demand  lor  labor. 
If  A  can  create  fifty  dollars  worth  of  fictitious  capital,  answering  his  purpose  as 
well  as  so  much  real  capital,  without  employing  labor,  he  will  do  it.  Hence,  the 
more  easily  such  capital  is  created,  the  \esslabor  may  be  in  request.  Hence  too,  an 
increase  of  prices,  arising  from  a  depreciation  in  the  currency,  may  be  attended 
with  a  diminution  in  the  demand  for  laborers,  and  want  of  employment  may  be 
most  felt  by  the  industrious  classes,at  the  very  moment  when  speculation  is  most  rife 
amongst  those  who  have  the  command  of  fictitious  means.  Pay  day  too  must  come, 
A  will  have  his  notes  to  pay;  or  if  he  escape,  the  fictitious  capital  he  has  passed 
into  other  hands,  must  at  last  be  tested  ;  when  perhaps  parties  entirely  innocent  will 
suffer  from  his  imprudence.  So,  in  a  country  where  fifty,  or  one  hundred  millions 
of  fictitious  capital  has  been  created,  pay  day  must  at  last  come.  The  test  will  be 
applied  to  every  thing  bearing  the  name  of  capital,  and  millions  of  individuals 
may  then  suffer  the  effects  of  that  collapse  in  the  price  of  every  article  which  brings 
it  back  to  its  original  labor  value. 


32 

State  Banks :  on  the  other  hand,  we  have  the  evils  of  a  depreciated  and 
unstable  currency,  resulting  from  the  unrestricted  and  irregular  issues  of 
these  Banks. 

Are  we  to  reject  the  advantages  on  account  of  the  evils  with  which 
they  are  attended,  or,  shall  we  find  a  remedy  for  these  evils,  and  retain  all 
the  advantages  ?  The  latter  course  is  certainly  the  dictate  of  common 
sense,  nor  is  it  a  difficult  course  to  be  pursued. 

The  evils  in  question,  arising  as  we  have  seen,  altogether  from  unre- 
stricted and  irregular  issues  of  Bank  paper,  nothing  more,  evidently,  is 
requisite  than  the  establishment  of  an  institution  by  the  operation  of  which 
throughout  the  country,  these  issues  must  necessarily  be  restricted  and 
regulated.  Such  an  institution  is  a  NATIONAL  BANK.  A  National  Bank, 
in  the  common  acceptation  of  the  term.  That  is,  a  Bank  of  discount  and 
deposit,  chartered  by  the  National  Government,  with  branches  in  the 
several  states.  Such  a  Bank  in  fine,  as  those  of  which  the  country  has 
already  experienced  the  benefit  at  different  times,  for  more  than  forty  years 
of  its  political  existence. 

Experience  already  warrants  the  assertion,  that  this  is  the  remedy  re- 
quired :  but  in  order  to  be  better  satisfied  on  this  point,  let  us  examine  into 
the  nature  and  tendency  of  its  operations. 

1st.  A  National  Bank  of  discount,  by  confining  each  of  the  local  Banks 
to  its  proper  specie  paying  limit,  preserves  to  the  country  the  usefulness 
of  these  institutions  :  while  it  provides  against  the  introduction  of  ficti- 
tious capital ;  and  checks  that  tendency  to  extravagant  issues,  which  is 
the  cause  of  depreciation  and  instability  in  a  paper  currency. 

2d.  A  National  Bank,  operating  through  its  branches,  diminishes 
the  time,  risk,  and  expense,  incident  to  exchanges  of  Bank  paper, 
and  to  the  transmission  of  funds  from  one  portion  of  the  country  to 
another  :  thus  reducing  the  rate  of  exchange  between  distant  States  to  the 
lowest  possible  point. 

3d.  A  National  Bank,  furnishing  the  government  with  a  suitable  trea- 
sury agent,  for  the  receipt,  disbursement,  and  safe  keeping  of  the  public 
moneys,  provides  by  its  whole  capital,  for  the  security  of  these  funds  ;  with- 
out depriving  the  community  of  the  trading  capital  to  be  derived  from  a 
judicious  use  of  the  government  deposits,  and  of  the  government  portion 
of  the  circulation ;  and  without  affording  room  for  the  exercise  of  favor- 
itism, or  corrupt  influence,  on  the  part  of  any  public  officers. 

4th.  A  National  Bank,  by  the  privileges  of  its  charter,  and  by  the 
confidence  it  affords  in  the  general  stability  of  our  Banking  System,  allures 
real  capital  from  abroad,  and  brings  it  from  its  lurking  places  at  home  : 
directly,  through  its  own  stock  ;  and  indirectly,  through  the  stocks  of  other 
moneyed  institutions  :  at  the  same  time  preventing  that  withdrawal  of  such 
capital  from  the  country,  which  must  otherwise  result  from  apprehensions 
of  a  continued  depreciation  of  the  currency. 

5th.  A  National  Bank,  by  restoring  the  Bank  paper  of  the  several  states 
to  a  specie  basis, — by  equalizing  the  exchanges, — by  providing  a  safe 
treasury  agent, — and  by  precluding  the  necessity  of  introducing  fictitious 
in  the  place  of  real  capital,  must  render  any  separation  of  the  public  mo- 
neys from  those  of  the  community  unnecessary  ;  while  it  enables  the  go- 
vernment to  collect  its  dues  in  all  sections  of  the  country  in  the  same  cur- 
rency, without  resorting  to  hard  money  requisitions  ; — so  far  providing,  in 
the  safest  and  most  beneficial  manner,  for  the  equalization  of  the  public 
burthens,  in  conformity  to  the  express  provision  of  the  constitution  to  that 
effect. 


33 
SECTION  II. 

Its  operation  upon  the  Local  Banks. 

A  National  Bank  of  discount  operates  upon  the  currency,  in  proportion 
to  the  magnitude  of  its  transactions,  by  paying  out  in  the  first  instance  its 
own  sound  currency,  whether  paper,  or  specie,  and  requiring  in  return  all 
its  dues  to  be  paid  either  in  specie  or  in  bills  of  other  Banks  equal  to 
specie.  If  the  Banks  have  but  little  to  loan  out,  it  must  have  little  to  re- 
ceive back,  and  of  course  the  effect  of  its  operations  must  be  small.  If 
the  Bank  act  merely  as  an  agent  in  collecting  the  public  moneys,  its  influ- 
ence on  the  currency  will  be  no  more  than  that  of  the  collectors  of  cus- 
toms, or  other  government  agents,  in  its  place.  The  result  would  simply 
be,  that  public  dues  must  be  paid  in  specie,  as  an  exception  to  the  general 
rule  ;  while  all  other  transactions  of  the  community  would  be  effected  in 
the  ordinary  currency.  The  government  may  do  as  much  as  this  with- 
out the  intervention  of  a  Bank :  and  even  more  readily,  as  it  may  enforce 
its  own  regulations.  But  whatever  regulations  the  Bank  may  adopt,  be- 
yond its  agency  for  the  government,  it  must  make  it  the  interest  of  its  cus- 
tomers to  observe  them. 

The  Bank  for  example,  lends  out  its  sound  currency  upon  express  con- 
dition, that  the  amount  shall  be  repaid  in  like  sound  currency.  No  one  is 
obliged  to  borrow  on  these  conditions,  but  if  he  does  borrow,  he  will  con- 
form to  them,  because  it  is  his  interest  to  do  so.  The  Bank  will  not  re- 
ceive deposits  except  in  specie,  or  Bank  bills  equal  to  specie  ;  it  cannot 
oblige  persons  to  make  deposits,  but  those  who  do  this,  do  it  because  it 
is  their  interest  to  conform  to  the  regulation.  No  one  complains  of  the 
regulation  however.  It  is  perfectly  fair.  We  may  suppose  there  are  two 
currencies  in  the  country,  the  sound,  and  the  unsound.  The  Bank  deter- 
mines to  deal  only  in  the  first,  and  requires  that  what  it  receives  should  be 
equal  to  what  it  gives  out ;  and  engages  that  what  it  gives  out  shall  be 
equal  to  what  it  receives.  The  only  question  then  with  a  customer  is, 
whether  it  is  his  interest  to  deal  with  the  institution  on  these  terms. 

The  Bank  has  money  to  lend,  and  like  all  other  Banks,  it  lends  in  pre- 
ference to  those,  who  make  deposits  with  it, — that  is,  its  depositors  or 
customers,  and,  as  with  all  other  banks,  those  who  keep  the  best  account, 
or  have  the  largest  average  amount  of  deposits  in  Bank  have  the  best 
chance  as  borrowers.  It  becomes  the  interest  then  of  all,  who  have  oc- 
casion to  borrow  money,  to  conform  to  the  regulation  of  the  Bank,  and  to 
keep  as  good  an  account  with  it  in  specie,  or  in  specie  bills,  as  they  can. 

Suppose  such  a  Bank  as  this  to  be  in  a  city  where  the  other  Banks  do 
not  pay  specie  for  their  bills.  No  one  who  has  specie  will  deposit  it  in 
these  Banks.  He  has  hitherto  kept  it  in  his  house,  or  in  some  secret 
place  ;  now  he  deposits  it  in  the  new  Bank,  the  bills  of  which  he  takes 
out  when  he  wants  the  money,  instead  of  specie.  5UI  the  specie  coming 
in  from  different  quarters,  takes  its  place  also  in  the  same  way  in  the  new 
Bank.  There  are  certain  persons  who  expect  to  have  bonds  to  pay 
who  will  require  a  loan  from  the  Bank  to  help  them.  These  persons  open 
an  account  at  the  Bank, others  look  forward  to  loans  soon  to  be  required  for 
different  purposes.  Each  one  withdraws  his  money  from  Banks  which 
do  not  pay  their  bills  in  specie,  obtains  the  silver  and  gold  at  some  loss, 

5 


34 

and  deposits  the  amount  in  the  new  Bank.  He  determines  at  the  same 
time  to  have  as  little  to  do  with  the  paper  of  the  old  Bank  as  he  can. 
There  are  now  fairly  two  paper  currencies  in  the  place.  But  the  new 
Bank  has  money  to  lend,  while  the  others  have  none.  The  new  currency 
is  therefore  more  and  more  sought  after  ;  while  the  old  is  more  and  more 
brought  back  to  the  Banks  to  which  it  belongs.  The  old  Banks  then  find- 
ing their  deposits  withdrawn,  their  circulation  returning  upon  them, 
and  their  business  closing  of  itself,  become  obliged,  if  able,  to  resume 
specie  payment.  If  entirely  unable,  they  close  their  concern.  If  they 
resume  specie  payments,  their  bills  will  be  taken  by  the  National  Bank 
as  other  specie  bills.  As  soon  as  this  is  the  case,  they  will  again  circu- 
late as  specie,  and,  confidence  in  the  Bank  returning,  deposits  will  again 
make  their  appearance. 

It  is  evident  that,  in  order  to  accomplish  so  much,  a  National  Bank,  or 
any  of  its  branches,  must  be  a  Bank  of  discount ;  and  it  must  discount 
promissory  notes,  as  well  as  bills  of  exchange  ;  for  no  one  will  keep  an 
account  with  a  Bank  where  the  notes  he  has  to  offer  cannot  be  discounted. 
If  the  Bank  deal  only  in  bills  of  exchange,  its  operations  will  have  no 
effect  upon  the  currency  of  the  place,  even  in  name,  the  difference  be- 
tween specie  bills,  and  those  not  commanding  specie,  being  blended  with 
the  different  rates  of  exchange  on  other  places.  The  paper  money  of  the 
place  will  still  circulate  in  all  payments  except  those  made  for  govern- 
ment account,  and  which  are  required  in  specie.  Some  small  improve- 
ment perhaps  may  take  place  from  the  sound  currency  given  out  by  the 
Bank  in  exchange  for  drafts  on  other  places  ;  but  its  action  in  restoring 
the  currency,  being  just  in  proportion  to  the  amount  which  it  loans  out, 
and  receives  back,  the  greater  its  ability  and  disposition  to  discount,  the 
sooner  a  sound  currency  will  take  entire  place  of  the  unsound. 

We  have  already  noticed  that  in  a  region  of  country  where  none  of  the 
Banks  pay  specie,  there  must  be  two  currencies,  one  of  hard  money,  and 
the  other  of  depreciated  paper.  If  in  this  region  a  National  Bank  of 
discount,  or  the  branch  of  such  a  Bank  be  established,  from  that  moment 
there  will  be  two  paper  currencies  in  the  place  :  one  equal  to  specie  and 
unchangeable,  the  other  depreciated  and  depreciating.  In  the  first,  the 
community  will  have  confidence  ;  in  the  last,  they  will  have  none.  The 
continual  effort  of  sellers  therefore  will  be  to  make  their  contracts  pay- 
able in  the  first  currency.  For  this,  a  corresponding  difference  in  price 
will  be  made,  and  all  new  promissory  notes,  acceptances,  &c.,  will  be 
made  payable  at  the  Bank  or  Banks  paying  specie.  In  addition  to  which 
a  sound  paper  currency  being  provided  in  the  place,  and  the  law  being  on 
the  side  of  specie  payments,  those  who  are  able  to  pay,  will  have  no  pre- 
tence for  offering  depreciated  paper,  on  the  ground  that  nothing  better  is 
to  be  procured.  From  this  time,  the  character  of  the  currency  in  this  re- 
gion is  restored,  a  few  bills  of  suspended  Banks  may  be  in  circulation, 
but  the  difference  between  these,  and  those  payable  in  specie,  will  be  so 
great  that  their  number  must  be  daily  less  and  less.  The  reputed  cur- 
rency of  the  place  will  now  be  that  of  Bank  paper  equal  to  specie. 

This  effect  being  produced  by  the  loans,  more  especially  of  a  National 
Bank  of  discount,  it  is  evident  that  in  order  that  the  same  effect  may  be 
brought  about  throughout  all  the  United  States,  there  must  be  a  similar 
Bank  or  branch  of  a  similar  Bank  in  each  of  the  states  in  the  union.  In 
states  where  all  the  Banks  pay  specie,  the  presence  of  such  a  Branch 
may  not  be  needed  for  the  restoration  of  the  currency  in  that  quarter  ;  but 


in  any  of  those  states,  or  sections  where  the  Banks  do  not  pay  specie, 
without  such  a  Bank  or  branch,  the  currency  will  remain  depreciated,  al- 
though in  all  others  where  there  are  branches  it  rnay  be  restored.  It  is 
easy  to  suppose  that  Banks,  having  suspended  specie  payments,  but  still 
deriving  a  profit  from  the  circulation  of  their  bills,  may  oppose  the  estab- 
lishment of  a  National  Branch  in  their  quarter.  They  will  oppose  it  for 
the  very  reason,  that  it  will  introduce  a  currency  better  than  their  own  ; 
and  we  may  suppose  these  Banks  to  have  sufficient  influence  with  their 
respective  legislatures  to  prevent  the  reception  of  such  a  Branch  into  the 
state,  if  its  establishment  be  optional  with  the  state.  It  follows  therefore 
that  a  National  Bank,  in  order  to  bring  about  a  uniform  restoration  of  the 
currency  throughout  the  country,  must  not  only  be  a  Bank  of  discount 
with  branches,  but  it  must  have  power  to  establish  branches  in  different 
states,  wherever  the  presence  of  such  a  Bank  may  be  requisite  for  the  end 
in  view.  Without  the  power  of  discounting,  the  Bank  cannot  act  effectu- 
ally upon  the  currency  :  without  branches  it  cannot  act  in  different  quar- 
ters of  the  country  ;  and  without  the  power  to  establish  branches  wher- 
ever the  state  of  the  currency  may  require  it,  the  restoration  of  that  which 
is  most  depreciated  may  be  prevented,  and  the  great  object  of  establish- 
ing a  uniform  currency  defeated. 

If  on  the  one  hand,  some  Banks,  too  far  gone  to  be  resuscitated,  find 
the  operation  of  a  National  Bank  inconvenient,  by  its  tending  to  bring 
their  affairs  to  a  close  ;  on  the  other  hand,  many  Banks,  less  embarassed, 
may  find  a  relief  where  they  least  expected  it.  Some  of  the  local  Banks 
have  become  crippled  in  their  means,  by  lending  their  money  either  to 
their  own  states,  or  upon  state  securities.  We  may  suppose  these  loans 
to  be  eventually  good,  but  the  money  cannot  be  called  in  so  as  to  enable 
these  Banks  to  apply  it  to  the  payment  of  their  own  notes.  Here  we 
may  suppose  a  National  Bank,  with  anew  and  ample  capital,  and  with  its 
peculiar  resources,  capable  and  disposed  to  furnish  precisely  such  assist- 
ance as  the  case  requires.  That  is,  it  lends  to  these  Banks  on  their  own 
credit,  together  with  the  security  of  the  same  State  Stocks,  a  sufficient 
amount  in  specie,  or  its  equivalent  to  enable  each  of  them  to  meet  its  bills 
in  gold  and  silver,  and  thus  to  do  at  once,  what  otherwise  it  might  not  be 
able  to  accomplish  in  many  years. 

We  may  now  consider  the  currency  restored,  and  suppose  a  community 
in  which  all  the  Banks  pay  specie  for  their  bills.  How  do  the  operations 
of  a  National  Bank  confine  the  other  Banks  to  their  proper  specie  paying 
limits,  so  that  they  may  not  place  themselves  in  the  position  of  being 
obliged  again  to  suspend  payment  ? 

We  have  noticed  the  dispositions  of  all  Banks  to  extend  themselves, 
unless  there  be  some  obstacle  to  prevent  it.  We  have  seen,  too,  in  what 
manner  a  number  of  Banks,  within  a  convenient  distance  of  each  other 
may  check  each  others  circulation  ;  and  we  have  seen  that  under  these 
circumstances  no  Bank  can  go  beyond  its  proper  limit,  without  the  indul- 
gence of  others.  Of  course  it  is  only  by  an  agreement  for  mutual  accommo- 
dation that  all  these  Banks,  within  a  given  vicinity,  can  allow  themselves 
any  such  indulgence.  We  have  seen  how  such  an  agreement  rnay  originate, 
each  institution  being  fearful  of  pressing  its  neighbor,  and  of  thus  bring- 
ing about  a  general  pressure,  affecting  its  own  debtors  ;  jeopardizing  the 
safety  of  its  own  loans,  as  well  as  endangering  the  individual  interests 
of  its  own  directors  or  conductors.  Hence  the  disposition  amongst  the 
Banks  of  any  single  state,  to  sustain  each  other  in  a  system  of  postponing 


36 

the  payment  of  their  bills  in  hard  money.  The  creditor  Banks  being 
satisfied  by  receiving  interest  on  their  balances  from  the  debtor  Banks.  In 
such  a  state  of  things,  there  is  but  one  obstacle  to  a  suspension  of  specie 
payments,  which  is  the  penalty  of  a  forfeiture  of  their  charters.  This 
penalty,  however,  is  a  matter  of  state  regulation.  If  the  Banks  of  the 
state  be  able  to  procure  indulgence  from  their  own  state  governments,  they 
have  nothing  to  fear  from  other  quarters. 

If  Banks  are  embarrassed,  it  is  because  their  debtors  cannot  pay  them. 
If  all  the  Banks  of  any  particular  state,  or  section,  are  obliged  to  suspend 
payment,  it  is  because  their  debtors  are  so  much  embarrassed  as  to  be 
unable  to  pay.  We  have  only  then  to  suppose  the  embarrassed  debtors, 
of  all  the  Banks  of  a  state,  to  form  a  class  sufficiently  powerful  and  nu- 
merous, to  influence  a  popular  election,  and  we  may  be  assured  that  their 
views  will  become  the  views  of  their  representatives.  These  persons 
will  desire  indulgence  for  the  Banks,  in  order  that  the  Banks  may  indulge 
them,  their  will  becomes  the  will  of  their  representatives.  The  indul- 
gence to  the  Banks  is  granted,  and  the  only  obstacle  to  a  general  suspen- 
sion of  payment  on  the  part  of  these  Banks  is  removed.  A  special  law 
sanctions  the  measure,  and  its  continuance  becomes  popular,  because  the 
number  and  influence  of  Bank  debtors  make  it  so. 

How  is  it  now  with  the  Branch  of  a  National  Bank,  under  similar  cir- 
cumstances ;  supposing  one  to  be  established  ?  Such  a  Branch  receives 
daily  the  bills  of  the  other  Banks,  as  well  as  of  its  own,  in  payment  of 
notes  and  drafts  on  deposit.  The  other  Banks  receive  also  the  bills  of 
the  Branch  in  common  with  their  own.  Daily,  or  weekly,  the  Branch 
balances  its  accounts  with  the  other  Banks,  and  whatever  difference  there 
may  be  in  its  favor,  the  same  must  be  paid  in  silver  or  gold.  This  pro- 
ceeding, regular  and  inevitable  as  it  must  be,  probably  will  prevent  the  state 
Banks,  each  from  going  beyond  its  respective  limits,  hence  the  question 
of  indulgence  as  in  the  previous  case,  may  never  arise.  But  suppose  all 
the  Banks  of  this  state,  to  have  so  extended  themselves  as  to  incline  them 
to  agree  upon  a  plan  of  not  calling  upon  each  other  for  balances  in  specie. 
They  apply  to  the  Branch  Bank  to  come  into  the  measure.  Here,  what- 
ever be  the  disposition  of  the  directors  and  officers  of  this  Branch,  they 
cannot  come  in.  They  are  merely  directors  of  a  Branch.  They  can 
only  refer  the  matter  to  the  Parent  Board.  The  Branch  has  also  its  bal- 
ances to  settle  with  other  Branches,  and  those  other  Branches  have  bal- 
ances to  settle  with  other  state  Banks.  Beyond  a  certain  limit  of  ac- 
commodation therefore  the  Branch  cannot  go.  It  must  pursue  its  regular 
routine  of  paying  specie  for  the  notes  of  its  own  Bank ;  and  requiring 
specie  for  the  notes  of  all  others  ;  or,  suppose  the  matter  referred  to  the  Pa- 
rent Board,  that  Board  cannot  refuse  specie  payments  itself,  neither  can  it 
authorise  one  of  its  Branches  to  refuse  such  payments  ;  still  less  can  it 
authorise  one  of  its  Branches  to  receive  the  notes  of  other  Banks,  with- 
out calling  on  them  for  specie  ;  while  it  continues  to  pay  specie  itself. 
The  course  of  the  National  Bank,  must  be  such  as  is  adapted  to  uniform 
action  throughout  the  whole  of  the  twenty-six  states.  It  cannot  make 
an  exception  in  one  state,  which  would  give  that  state  a  preference  over 
others. 

Here  again  these  circumstances  alone,  may  pevent  matters  from  going 
further.  The  state  Banks  finding  themselves  obliged  to  pay  specie,  re- 
strict their  issues,  make  some  unusual  efforts  to  supply  themselves  with 
silver  and  gold,  and  save  themselves  before  it  is  too  late? 


37 

But  suppose  the  general  embarrassment  to  be  so  great  amongst  the  debt- 
ors of  the  state  Banks,  and  even  of  those  of  the  Branch,  that  a  suspen- 
sion of  specie  payments  is  called  for,  by  the  popular  voice  of  that  whole 
section  of  country.  This  popular  voice  furnishing  an  assurance  to  the 
state  Banks,  that  their  charters  will  not  be  forfeited  by  suspension  ;  the 
argument  avails  nothing  with  the  Branch  Bank  or  with  its  Parent  Board. 
The  National  Bank  has  another  source  of  authority  to  look  up  to.  It  de- 
rives its  power  from  the  national  government,  and  it  must  have  the  assu- 
rance that  the  majority  of  the  representatives  of  twenty  six  different  states, 
together  with  the  executive  magistrate  for  the  time  being,  will  authorise 
its  refusing  to  pay  its  bills  in  hard  money,  before  it  can  come  into  any 
measure  of  the  kind,  in  any  part  of  the  country. 

Such  a  case  cannot  be  supposed.  Nothing  but  the  utmost  punctuality 
in  its  payments  can  enable  a  National  Bank  to  sustain  itself,  or  to  procure 
the  protection  of  the  national  government  at  any  time.  Its  very  charac- 
ter and  position  exposes  it  to  every  possible  accusation,  to  be  grounded  on 
any  irregularity  in  its  proceedings  ;  and  such,  it  is  desirable  for  the  pub- 
lic good,  should  be  the  case. 

A  National  Bank  therefore,  from  its  organization,  from  its  accountability 
to  the  national  government,  and  from  its  peculiar  dependence  upon  a  pre- 
cise conformity  to  the  provisions  of  its  charter,  must  act  as  a  check  upon 
the  operations  of  other  Banks,  in  a  way  not  to  be  compromised.  This 
action  too  must  be  uniform  throughout  the  country,  because  what  we  have 
predicated  of  one  Branch,  may  be  equally  so  of  all,  or  of  any  of  the  others. 
If  we  suppose  a  Branch  of  the  National  Bank  to  be  located  in  each  of  the 
twenty-six  states,  each  Branch  must  operate  in  the  manner  supposed  upon 
the  local  Banks  in  its  neighborhood.  No  Branch  can  suspend  payment 
itself,  or  admit  of  the  suspension  of  other  Banks  dealing  within  it,  with- 
out authority  from  the  Parent  Board  ;  and  this  Parent  Board  cannot  de- 
viate from  the  terms  and  conditions  of  its  charter,  without  an  act  of 
Congress  ;  and  such  an  act  cannot  be  passed  without  at  least,  a  majority 
of  both  houses  of  the  National  Legislature  together  with  the  consent  of 
the  President. 

Here  then  we  have,  in  the  existence  of  a  National  Bank,  both  the 
means  of  restoring  a  depreciated  currency,  and  two  distinct  and  different 
guaranties  for  the  maintainance  of  specie  payments,  on  the  part  of  the  local 
Banks,  where  there  was  only  one  before. 


SECTION  III. 
Operation  of  a  National  Bank  upon  the  Domestic  Exchanges. 

Having  reached  a  state  of  circumstances,  in  which  all  the  Banks  are 
supposed  to  pay  specie  for  their  bills,  we  come  now  to  inquire  in  what 
manner  the  operations  of  a  National  Bank  tend  to  reduce  the  difference 
in  the  rate  of  exchange,  between  distant  states,  to  their  lowest  possible 
point. 

Difference  of  exchange  between  different  sections  of  the  country,  and 
difference  in  the  value  of  bank  notes  of  those  sections,  it  must  be  remem- 
bered, are  distinct  subjects. 

Where  all  Banks  pay  specie  on  demand  for  their  paper,  the  bills  of  each 
Bank  will  be  at  par  in  its  respective  locality.  Where  two  Banks,  in  the 


38 

same  place,  pay  specie,  there  is  no  difference  in  the  value  of  their  bills  ; 
but  if  one  Bank  pay  specie,  and  the  other  does  not,  there  will  be  then  a 
difference  in  proportion  to  the  probability  of  obtaining  an  equivalent  for 
the  face  of  the  bills  of  the  suspending  Bank.  So  where  the  Banks  of  one 
section  of  the  country  pay  specie,  and  those  of  another  section  do  not, 
there  will  be  the  same  kind  of  difference  in  the  value  of  the  bills  ;  but  this 
is  not  a  matter  of  Exchange,  in  the  ordinary  acceptation  of  the  term. 

The  Banks  in  New  Orleans,  and  the  Banks  in  New  York,  may  both 
pay  specie,  and  yet  there  will  be  a  difference  in  the  rate  of  Exchange  be- 
tween the  two  places.  In  the  ordinary  transactions  of  business,  this  dif- 
ference of  Exchange,  which,  as  we  shall  see,  cannot  exceed  a  certain 
rate,  is  not  material,  because  the  rate  of  Exchange  is  taken  into  consider- 
ation and  forms  part  of  the  price  in  the  sale  and  purchase  of  goods  ;  but 
as  the  Constitution  of  the  United  States  requires  the  payment  of  all  dues 
to  government  to  be  the  same  in  every  part  of  the  country,  that  the  citizens 
of  one  state  be  not  obliged  to  sustain  any  greater  burthen  than  those  of 
another,  it  is  desirable,  and  it  is  even  incumbent  upon  the  administrators 
of  government,  to  adopt  such  measures  as  will  tend  to  reduce  the  difference 
of  Exchange  between  different  points,  to  the  lowest  possible  rate.  For 
this  purpose,  as  experience  has  shown,  nothing  is  so  well  calculated  as 
the  establishment  of  a  National  Bank  of  discount  and  deposit,  with  branch- 
es in  every  state. 

The  difference  of  Exchange  in  contemplation,  arises,  in  the  first  place, 
from  the  difference  in  the  wants  of  the  community,  in  respect  to  funds,  at 
different  periods  of  the  year  ;  and  in  the  second  place,  from  the  difficulty 
of  transmitting  these  funds  from  the  place  where  they  are  least  wanted,  to 
that  where  they  are  more  wanted. 

At  certain  seasons  of  the  year,  money  is  wanted  in  the  city  to  procure 
supplies  for  the  country  ;  at  other  seasons,  money  is  wanted  in  the  country 
to  pay  for  the  produce  sent  to  the  city.  So  at  one  season,  money  is 
wanted  at  New  Orleans  to  pay  for  the  crops  of  cotton,  sugar,  tobacco,  &c., 
collected  at  that  place  ;  at  other  seasons  of  the  year,  money  is  wanted  at 
New  York  to  pay  for  the  supplies  of  clothing,  household  stuff,  &c.,  sent 
to  New  Orleans  for  distribution  over  the  south-western  stales.  Funds 
cannot  be  kept  in  New  York  or  New  Orleans  for  a  great  part  of  the  year, 
because  they  will  be  wanted  at  a  certain  period.  This  would  occasion  a 
loss  of  interest,  and  a  loss  of  profit,  much  more  important  than  any  differ- 
ence of  Exchange,  besides  a  great  inconvenience  to  the  parties  interested. 
These  funds,  therefore,  must  go  and  come  as  they  are  called  for.  Here, 
then,  is  the  first  element  of  the  difference  of  Exchange,  and  the  main 
point  is  to  enable  these  funds  to  go  and  come  in  the  cheapest,  safest,  and 
most  expeditious  manner  possible,  which  belongs  to  the  next  subject  of 
consideration. 

The  rate  of  Exchange  depends  upon  three  distinct  items  :  the  expense, 
the  risk,  and  the  loss  of  time,  incident  to  the  transmission  of  funds  from 
one  place  to  another. 

The  transmission  of  merchandize  is  a  matter  of  speculation,  and  must 
be  confined  to  those  who  are  acquainted  with  the  trade.  Bank  bills,  and 
bills  of  Exchange,  being  out  of  the  question,  we  suppose  the  funds  in  con- 
templation to  be  transmitted  in  specie.  Some  kinds  of  specie,  indeed,  such 
as  Spanish  dollars,  and  doubloons,  are  often  worth  more  in  one  place  than 
they  are  in  another,  but  this  consideration  also  we  set  aside,  belonging,  as 
it  does,  to  matters  of  merchandize. 


39 

We  suppose,  then,  a  merchant,  or  banker,  in  New  York,  wishing  to 
place  funds  in  New  Orleans,  in  the  cheapest  and  most  sure  manner.  He 
sends  the  amount  in  American  dollars,  or  eagles — silver  or  gold  —  of  pre- 
cisely the  same  value  in  both  places.  In  doing  this,  the  merchant  incurs, 
in  the  first  place,  the  expense  of  transportation  : — 

He  pays  for  the  freight  from  New  York  to  New  Orleans,         l  per  cent. 
He  must  next  insure  against  the  hazard  of  the  sea,  or  take 

the  risk  himself. 

Here  he  pays  a  premium  of  another  J         " 

Again,  from  the  time  he  pays  for  his  specie  in  New  York, 
till  it  goes  to  his  credit  in  New  Orleans,  he  loses  the 
interest,  say  for  thirty  days,  which  may  be  put  down 
also  as  another  \  " 

To  these  three  certain  items,  may  be  added  brokerages, 
commissions,  and  other  incidental  charges,  equal  to  a 
further  quarter  or  \  " 

Thus  we  have  the  expense,  risk,  and  loss  of  time,  incident  to  transmit- 
ing  funds,  in  specie,  from  New  York  to  New  Orleans,  equal  to  one  and  a 
half  or  two  per  cent. — which  is  the  second  element  of  Exchange,  or  that 
which  regulates  its  rate. 

We  now  suppose  the  person  making  the  remittance,  to  go  to  a  dealer  in 
Exchange  for  a  bill  on  New  Orleans.  The  d.ealer,  in  effect,  makes  the 
same  calculation  and  names  his  price,  including  the  profit  which  he  pro- 
poses to  make  in  the  transaction  ;  and  taking  into  consideration  the  ad- 
vantage he  gains  by  having  the  money  in  New  York  while  his  bill  is  on 
the  way  to  New  Orleans,  and  while  it  is  coming  due  after  it  gets  there  ; 
and  on  the  other  hand,  considering  the  expense  of  commissions  or  agency, 
to  which  he  may  be  subjected  at  the  point  upon  which  he  draws. 

Where  the  business  of  Exchanges  is  in  the  hands  of  private  dealers, 
each  having  to  support  his  own  establishment  upon  the  profit  of  this  bu- 
siness, it  is  seldom  that  they  can  afford  to  sell  their  bills  so  low  as  barely 
to  cover  the  expense  of  transmitting  the  amount  in  specie.  In  addition  to 
this,  they  have  rarely  a  large  amount  to  draw  for  in  different  places,  for  if 
they  kept  such  amounts  lying  in  the  hands  of  distant  correspondents,  or 
agents,  besides  other  hazards,  they  might  lose  more  interest  on  their 
money,  than  they  gained  by  drawing  and  remitting.  Such  persons  can 
go  only  to  a  certain  extent,  and  when  called  upon  to  furnish  bills  beyond 
what  they  have  actually  to  draw  for,  if  they  do  it  at  all,  it  must  be  at  such 
a  rate  as  they  think  will  certainly  cover  every  expense,  hazard,  or  loss  of 
time,  to  which  they  may  be  subjected. 

The  same  may  be  said  of  State  Banks.  If  they  undertake  to  operate 
as  dealers  in  Exchange,  they  can  only  do  it  to  a  limited  extent ;  and  if 
they  employ  agents,  these  agents  must  be  paid.  If  they  transmit  specie, 
they  pay  the  same  charges  as  other  dealers.  If  two  or  more  banking  es- 
tablishments interchange  drafts,  each  establishment  must  support  itself; 
and  each  gives  only  a  limited  credit  to  the  other.  The  result  being  finally 
the  same,  that  neither  local  Banks,  nor  individual  dealers,  can  furnish  bills, 
or  will  be  disposed  to  furnish  bills,  at  a  less  rate  than  will  cover  the 
freight,  insurance,  commissions,  loss  of  time,  &c.,  incident  to  the  trans- 
portation of  hard  money — together  with  at  least  some  profit,  however 
small,  on  the  transaction. 

We  will  now  suppose  the  existence  of  a  National  Bank  of  discount  and 
deposit,  with  ample  capital,  and  with  the  requisite  number  of  branches. 


40 

So  long  as  such  a  Bank  is  drawing  interest  for  all  its  means,  it  is  imma- 
terial whether  this  interest  be  drawn  by  one  Branch  or  another.  What- 
ever the  number  of  Branches,  and  however  distant  from  each  other  they 
may  be,  there  is,  in  fact,  but  one  concern  ;  and  for  this  reason  also,  there 
is  the  same  confidence  on  the  part  of  the  Bank,  in  one  Branch  that  there 
is  in  another.  So  that  the  objections  of  loss  of  interest  and  want  of  confi- 
dence, which  might  occur  between  distant  individuals,  or  between  distant 
local  Banks,  cannot  occur  here. 

The  Branches  are  established  in  different  sections  of  the  country,  prin- 
cipally for  the  purpose  of  doing  the  business  of  the  government,  and  of 
gaining  interest  by  lending  or  discounting  money.  Whether  the  busi- 
ness of  Exchanges,  in  any  particular  section,  be  a  matter  of  importance 
or  not,  the  Branch  must  be  established  there.  The  Exchange  business 
being  but  a  secondary  and  incidental  object;  consequently  the  expense  of 
maintaining  the  establishment  hardly  enters  into  a  calculation  of  the  rate 
of  Exchange.  The  Bank  has  the  advantage  of  the  public  deposits.  Its 
bills  being  receivable  for  public  dues,  all  over  the  country,  it  has  the 
advantage  of  an  extended  circulation,  which  affords  also  to  the  country  a 
supply  of  a  certain  amount  of  currency  every  where  at  par.  It  is  able, 
therefore,  to  conduct  the  business  of  Exchange  on  lower  terms  than  any 
other  establishment,  for  the  same  reason  that  a  line  of  stage  coaches,  paid 
for  carrying  the  public  mail,  can  afford  to  take  passengers  and  baggage 
cheaper  than  coaches  depending  for  their  maintenance  upon  the  carriage 
of  passengers  only. 

Then  as  to  time,  if,  for  example,  the  Branch  at  New  Orleans  have  a 
surplus  of  funds  arising  from  bills  collected,  sent  out  by  the  Branch  in 
New  York,  that  surplus  may  be  lent  out  in  New  Orleans  as  well  as  at 
New  York,  being  for  account  and  benefit  of  the  same  institution  and  of  the 
same  stockholders.  Or  if  the  Branch  in  New  York  have  a  surplus  arising 
from  the  bills  remitted  from  New  Orleans,  the  interest  accruing  in  New 
York  is  for  the  same  account.  If  the  Branch  at  New  Orleans  be  short  of 
funds,  in  consequence  of  the  amount  remitted  to  New  York,  it  may  draw 
on  some  of  the  southern  or  western  Branches.  If  the  Branch  at  New 
York  be  short,  or  expect  to  be  so,  it  may  be  supplied  from  some  of  the 
northern  or  eastern  Branches.  All  of  the  Branches  applying  to  the  Parent 
Board,  as  to  a  common  source  of  information,  for  direction  as  to  the  em- 
ployment of  their  surpluses,  or  as  to  the  supplying  of  their  wants.  In  this 
way,  each  Branch  can  conveniently  wait  the  course  of  trade,  to  receive 
back  the  funds  it  has  parted  with ;  while  the  whole  country  is  accommo- 
dated, and  no  very  pressing  demand  for  Exchange  or  for  specie,  is  made 
on  any  particular  section. 

When  nooftey  is  wanted,  for  example,  in  New  Orleans,  for  the  purchase 
of  the  southern  crops,  the  Branch  there  may  furnish  the  money,  and  take 
bills  at  sixty  or  ninety  days  sight,  on  the  Branch  in  New  York.  By  the 
time  these  bills  are  due,  or  soon  afterwards,  money  may  be  wanted  in 
New  York,  to  purchase  goods  for  New  Orleans.  The  New  York  Branch 
then  supplies  the  money,  and  takes  bills  on  New  Orleans.  If  these  trans- 
actions occurred  between  independent  establishments,  or  dealers  in  Ex- 
change, each,  from  want  of  confidence,  from  fear  of  losing  interest,  or 
from  desire  of  maintaining  a  high  reputation  for  punctuality  and  precision, 
might  feel  obliged,  however  inconvenient,  to  transmit  its  balances  in  silver 
and  gold,  at  the  cost  of  so  much  expense,  risk,  and  loss  of  time  ;  causing, 
on  all  these  occasions,  a  corresponding  rise  in  the  price  of  Exchange,  or 


41 

an  increased  demand  for  specie.  Whereas,  in  the  case  supposed  of  a  Na- 
tional Bank,  with  Branches,  the  actual  transmission  of  specie,  in  most  in- 
stances, is  saved,  and  the  difference  of  Exchange,  if  any,  is  brought  down 
to  a  mere  fraction  ;  the  result  of  the  combined  action,  or  arbitration  of  Ex- 
changes, in  the  arrangement  of  balances  of  different  Branches  of  the  Bank. 
The  New  York  Branch,  for  instance,  being  in  debt  to  the  New  Orleans 
Branch — the  Baltimore  Branch  in  debt  to  the  New  York  Branch — the 
Branch  at  St.  Louis  in  debt  to  the  Branch  at  Baltimore — the  Branch  at 
Natchez  to  the  Branch  at  St.  Louis  ;  the  Natchez  Bank  may  finally  be 
called  upon  to  pay  the  debt  of  the  New  York  Branch,  to  that  of  New 
Orleans. 

Here,  then,  we  see  in  what  manner,  and  for  what  reason,  a  National 
Bank  is  capable  of  reducing  the  various  Exchanges  of  the  country  to  their 
lowest  possible  rate  ;  and  certainly  to  a  degree  beyond  that  which  can  be 
effected  through  any  other  known  instrumentality  ;  although,  in  the  nature 
of  things,  some  trifling  difference  in  the  rate  of  Exchange,  between  distant 
sections  of  an  extensive  country,  at  certain  periods,  is  unavoidable. 

At  the  same  time,  the  arrangement  is  most  beneficial  to  the  country,  as 
the  large  resources  of  the  Bank  enable  it  to  furnish  funds,  at  different 
points,  in  anticipation  of  the  crops  coming  in,  or  of  goods  about  to  be  sup- 
plied ;  thereby  equalizing  the  rates  of  Exchange  throughout  the  year;  or 
at  least  preventing  that,  extreme  fluctuation  which  must  take  place  where 
the  transmission  of  funds  is  confined  altogether  to  particular  seasons. 


SECTION  IV. 

•  Operation  of  a  National  Bank  as  a  Fiscal  Agent. 

Let  us  now  consider  the  operation  of  a  National  Bank,  in  providing  for 
the  safety  of  the  public  moneys,  without  depriving  the  community  of  the 
advantage  of  capital  to  be  derived  from  the  use  of  those  moneys, — either 
while  in  the  public  Treasury,  or  while  in  the  process  of  circulation.  We 
are  to  see,  at  the  same  time,  how  this  object  is  obtained  without  allowing 
room  for  the  exercise  of  favoritism  towards  any  particular  State  or  Bank, 
and  without  involving  the  exercise  of  government  influence,  either  in  as- 
signing a  place  of  deposit  in  the  first  instance,  or  in  removing  the  public 
funds,  and  transfering  the  government  agency,  from  one  institution,  or  in- 
dividual, to  another. 

We  have  seen,  in  the  case  of  private  Banks,  that  the  deposits  of  indi- 
viduals of  their  surplus  funds  in  these  Banks,  is  a  placing  in  the  way  of 
active  employment,  of  so  much  real  capital  otherwise  remaining  idle,  and, 
for  the  time  being,  out  of  reach.  The  operation  is  the  same,  with  regard 
to  the  public  deposits.  If  the  government  keep  its  money  in  its  own 
vaults  or  safes,  in  such  a  way  as  not  to  admit  of  its  being  used  for  purposes 
of  trade,  it  is  so  much  idle  capital,  occasioning  the  loss  of  so  much  power 
in  capital  to  the  nation  ;  no  one  being  benefited,  either  by  the  interest  to 
be  earned,  or  by  the  profits  to  be  gained  beyond  the  interest,  from  the 
loan  of  it. 

Suppose  the  average  amount  of  these  deposits  to  be  ten  millions  of  dol- 
lars, scattered  throughout  the  twenty-six  states.  Here  is  an  annual  loss, 
on  ten  millions  of  dollars,  of  interest  and  profit,  which  would  have  gone 

6 


42 

into  the  pockets  of  the  people  of  the  country,  and  would  have  enriched 
the  nation  in  the  same  degree.  The  wealth  of  the  whole  nation  being 
made  up  of  the  riches,  or  property,  more  or  less,  of  every  individual  citi- 
zen. Not  only  this  :  the  unavoidable  operation  of  the  business  of  the  va- 
rious Branches  of  the  Bank,  is  to  bring  this  capital,  at  proper  periods,  into 
all  those  sections  of  the  country  where  it  is  most  wanted  ;  like  the  waters 
of  some  ample  reservoir,  by  a  variety  of  conduits,  seeking  every  where, 
and  at  all  times,  its  proper  level. 

At  the  same  time,  this  is  without  hazard  to  the  public  treasury,  because 
the  whole  capital  of  the  Bank  is  answerable  for  the  use  made  of  the  pub- 
lic moneys,  by  each  and  all  of  its  Branches.  Suppose,  for  instance,  the 
largest  amount  of  the  public  funds  at  any  time  on  hand,  to  be  ten  millions 
of  dollars,  and  the  capital  stock  of  the  Bank  to  be  thirty  or  forty  millions  ; 
here  is  a  security  for  the  public  moneys,  of  three  or  four  times  the  amount, 
in  every  event  at  hazard.  We  suppose,  of  course,  the  national  govern- 
ment, in  chartering  a  Bank,  to  prescribe  an  amount  of  capital  amply  suffi- 
cient to  secure  the  public  revenue. 

There  might  be,  it  is  true,  the. same  active  employment  of  this  capital, 
if  the  same  amount  of  deposits  were  divided  amongst  different  State  Banks, 
but  the  security  to  the  country  would  not  be  equally  good.  Each  Bank 
would  then  be  answerable  only  for  its  own  management  of  the  amount 
committed  to  its  charge.  In  some  cases,  the  whole  capital  of  such  a  Bank 
may  not  be  equal  to  the  amount  of  funds  over  which  it  may  gain  the  con- 
trol ;  and  if  a  Bank  furnish  the  additional  security  of  individuals,  besides 
the  difficulty  of  realizing  any  thing  from  the  prosecution  of  bonds  in  ccses 
of  delinquency,  these  individuals  may  be  the  very  persons  who  borrow 
the  money  of  the  Bank,  and  if  the  Bank  be  delinquent,  it  is  because 
these  borrowers  are  delinquent ;  or  they  may  be  the  large  stockholders  of 
the  institution,  whose  own  means  depend  upon  the  condition,  and  whose 
ability  to  respond,  depends  upon  the  solvency  of  the  institution  for  which 
they  become  responsible.  As  a  general  rule,  wealthy  individuals  will  not 
become  the  bonds-men  of  a  Bank,  for  the  use  of  the  public  moneys,  unless 
they  themselves  are  to  divide  this  use  amongst  them ;  in  which  case  the 
Bank,  and  its  security,  are  one  and  the  same  thing.  Besides  this,  how 
difficult  must  it  be  for  the  officers  of  the  Treasury  department,  at  the  seat 
of  government,  to  judge  correctly,  either  of  the  solidity  of  the  local  Banks, 
or  of  the  individual  security  they  offer,  throughout  all  the  States  of  the 
Union. 

With  a  National  Bank,  on  the  contrary,  the  government  looks  to  the 
whole  capital  for  the  security  of  every  Branch,  while  it  has,  by  charter, 
the  right  of  inspection  and  examination,  and,  to  a  certain  degree,  of  con- 
trol, over  all  its  proceedings,  so  far,  at  least,  as  may  be  necessary  for  the 
security  of  all  the  public  funds  committed  to  its  charge.  Such  a  provi- 
sion, in  the  nature  of  the  case,  cannot  exist  in  an  equal  degree,  with  State 
Banks,  They  may  agree  to  submit  to  such  an  investigation,  but  this  be- 
ing but  a  voluntary  act,  can  be  depended  upon  only  so  long  as  it  is  not  their 
interest  to  avoid  a  scrutiny  ;  being,  as  they  must  be,  independent  of  the 
national  government,  and  depending  only  upon  that  of  their  respective 
states  for  the  continuance  of  their  existence  or  their  privileges.  A  Na- 
tional Bank,  on  the  contrary,  is  the  creature  of  the  national  government. 
To  that  it  is  responsible,  and  on  that  it  depends  ;  and  hence  the  peculiar 
security  offered  by  its  capital.  Not  only  that  its  nominal  amount  shall 
be  amply  sufficient,  but  that  Congress  and  the  Executive  have,  at  all  times, 


43 

the  right  to  be  satisfied  that  this  security  is  real,  available,  and  undimin- 
ished. 

But  besides  the  difference  of  security,  it  is  important,  for  the  liberties 
of  the  country,  that  there  be  no  room  for  making  the  use  of  the  public 
moneys  a  source  of  government  patronage. 

The  use  of  capital  is  a  privilege  equal  to  the  grant  of  as  much  money 
as  this  capital  may  be  supposed  capable  of  yielding,  by  interest  or  profit, 
in  the  period  during  which  its  use  is  enjoyed.  If  the  use  of  the  public 
deposits  be  distributed  amongst  the  different  State  Banks,  at  the  will  of 
those  who  administer  the  government,  these  persons  will  enjoy  a  power 
of  patronage  equal  to  the  granting  of  so  much  money  as  the  interest  and 
profit  to  be  derived  from  these  deposits  may  be  supposed  to  yield.  If,  for 
example,  the  sum  of  six  hundred  thousand  dollars  were  placed  at  the  dis- 
position of  the  President  of  the  United  States,  to  distribute  in  donations  to 
whom  he  pleased,  every  one  would  consider  this  a  very  dangerous  power; 
and  if  the  President  has  the  power  of  distributing  the  use  of  ten  millions 
of  dollars,  the  simple  interest  of  which  alone  for  one  year  is  six  hundred 
thousand  dollars,  is  not  the  power  equally  dangerous  ?  How  much  more, 
then,  when  we  consider  the  anticipations  of  profit,  in  which  every  one  in- 
dulges, who  has  the  proposed  use  of  capital  before  him.  The  power  to 
influence  on  the  one  hand,  and  the  temptation  to  corruption  on  the  other, 
being  in  proportion  rather  to  the  prospect,  than  to  the  certainty,  of  profit. 
Banks,  as  mere  corporate  bodies,  it  is  true,  are  not  the  subjects  of  tempta- 
tion ;  but  it  must  be  remembered  that  the  public  moneys  distributed  amongst 
Banks,  at  the  pleasure  of  a  public  officer,  are,  in  fact,  distributed  amongst 
the  directors,  customers,  and  stockholders,  of  those  Banks,  and  it  is  upon 
these  that  the  influence  of  this  government  patronage  must  unavoidably 
act. 

If  certain  State  Banks  throughout  the  twenty-six  United  States,  be  se- 
lected by  Congress  as  public  agents,  then  the  halls  of  the  national  legisla- 
ture becomes  scenes  of  intrigue  and  cabal,  for  the  division  of  this  descrip- 
tion of  spoils  ;  and  Senators  and  members  of  Congress  will  be  elected  ac- 
cording as  this,  or  that,  Bank  makes  the  most  efforts  in  favor  of  the  mem- 
ber pledged  to  support  its  claims.  If  the  selection  be  left  to  the  President, 
or  to  the  Treasury  Department,  which,  in  effect,  must  be  the  same  thing, 
he  will  have  so  much  pecuniary  power  put  into  his  hands  to  enable  him 
to  secure  his  own  re-election  ;  and,  if  he  aim  at  it,  even  to  perpetuate 
his  enjoyment  of  office.  He  will  give  the  use  of  this  public  capital  to 
such  sections  of  the  country,  and  to  such  Banks,  and  through  them  to  such 
individuals — and  transfer  their  use  from  one  section  to  another,  and  from 
one  Bank  to  another,  or  from  one  set  of  individuals  to  another — in  such 
way  as  will  best  promote  his  own  views  :  either  in  punishing  those  who 
do  not  gratify  his  wishes,  or  in  rewarding,  and  even  bribing,  those  most 
officious  in  promoting  his  designs. 

In  the  case  of  a  National  Bank,  on  the  other  hand,  there  is  no  room  for 
the  process  of  favoritism  here  supposed.  Such  an  institution  is  chartered 
expressly  to  receive  and  disburse  the  public  moneys.  The  use  of  the 
public  deposits,  therefore,  must  be  given  to  such  a  Bank  by  the  act  of  in- 
corporation, before  it  is  known  who  the  stockholders,  directors,  or  officers, 
are  to  be.  The  stock  is  afterwards  subscribed  for,  and  sold,  in  open  mar- 
ket ;  and  the  shareholders  are  under  no  obligation  to  the  government,  or 
to  any  member  of  the  government,  for  the  number  of  shares  they  obtain, 
nor  for  any  benefit  they  afterwards  receive  from  these  shares.  The  privi- 


44 

leges  of  the  Bank  are  fixed  by  law,  and  cannot  be  changed,  except  by  law, 
so  long  as  the  institution  complys  with  all  the  conditions  of  its  charter. 
The  officers,  directors,  and  customers, are,  therefore,  entirely  independent 
of  the  administrators  of  government,  so  far  as  any  opportunity  for  favorit- 
ism or  patronage  is  in  question.  The  Bank  receives  the  public  deposits, 
because  the  government  is  pledged  to  place  them  with  that  institution ; 
and  they  cannot  be  removed  without  a  breach  of  public  faith  ;  still  less 
can  they  be  transferred  from  one  place  to  another,  or  from  one  set  of  indi- 
viduals to  another,  to  answer  any  electioneering  purpose.  At  least,  such 
a  violation  of  public  decency  must  call  down  upon  the  offender  an  almost 
universal  sentiment  of  reprobation  :  a  burst  of  indignation  which  few  can- 
didates for  public  favor  would  venture  to  encounter. 

If,  instead  of  leaving  the  public  moneys  in  the  ordinary  way  of  deposits 
in  certain  Banks,  the  officers  of  the  Treasury  receive  from  those  Banks 
their  own  notes,  or  bills,  or  other  paper  obligations,  and  lock  them  up  in 
vaults  or  safes,  this  amount,  whatever  it  may  be,  is  so  much  added  to  the 
circulation  of  those  Banks,  with  the  assurance  that  it  will  not  be  brought 
back  upon  them  for  a  certain  period.  Here,  then,  is  another  opportunity 
for  favoritism  :  for  if  those  who  administer  the  government,  may  choose 
what  bank  notes  they  will  receive  and  lock  up,  and  what  they  will  refuse, 
they  have  the  power  of  giving  just  so  much  use  of  capital  to  those  Banks, 
and  to  those  individuals,  whom  they  wish  to  favor  ;  to  which  dangerous 
influence,  is  to  be  added  the  hazard  of  so  much  bank  paper,  which  may 
prove  a  partial,  or  total,  loss  to  the  Treasury. 

The  direction  to  a  public  officer,  to  keep  the  funds  of  government  out 
of  trade,  and  out  of  a  Bank,  will  answer  no  purpose  as  security,  unless  he 
keep  these  funds  absolutely  in  silver  and  gold,  in  a  vault  by  themselves  ; 
for  if  such  an  officer,  having  five  hundred  thousand  dollars  of  the  public 
money  on  hand,  keep  the  amount  in  certain  Bank  notes,  of  five,  ten, 
twenty,  or  one  hundred  dollars  each,  he  trusts  that  Bank  just  as  much  as 
if  he  took  one  bank  note,  or  check,  for  the  whole  amount ;  in  fact,  just  as 
much  as  if  he  allowed  the  Bank  to  pass  the  whole  five  hundred  thousand 
dollars  to  his  credit,  with  the  bare  understanding  that  it  should  be  forth- 
coming when  called  for. 

So  in  regard  to  what  we  have  already  termed  the  government  portion 
of  the  circulation.  We  have  seen  that  every  dollar  held  by  the  people  in 
paper,  either  in  their  shops  or  houses,  or  pockets,  or  as  it  may  be  passing 
from  hand  to  hand,  leaves  a  dollar  of  real  capital  in  the  Bank,  which  is 
capable  of  being  loaned  out  and  actively  employed.  The  money  put  in 
circulation  by  the  agents  of  the  government,  has  the  same  faculty,  in  this 
respect,  as  that  in  the  hands  of  private  citizens.  If  then  government  offi- 
cers, by  employing  certain  Banks  as  their  agents,  put  the  bills  of  those 
Banks  into  circulation,  and  keep  them  so,  in  preference  to  the  bills  of  other 
Banks,  here  is  again  an  opportunity  for  government  patronage,  and  another 
means  of  giving  the  use  of  a  certain  amount  of  capital  to  certain  institu- 
tions, accompanied  with  the  risk  of  the  paper  of  these  institutions,  so  long 
as  it  may  be  under  the  direction  of  such  government  officers. 

This  room  for  patronage,  both  in  respect  to  the  use  of  capital  derived 
from  the  public  deposits  and  from  government  circulation,  can  only  be 
avoided  (without  a  National  Bank)  by  a  hard  money  system  ;  in  which 
case,  as  we  have  seen,  the  whole  use  of  this  capital  must  be  lost  to  the 
country. 

With  a  National  Bank,  on  the  contrary,  as  in  the  case  of  the  deposits — 


45 

so  in  that  of  the  circulation — there  can  be  no  room  for  favoritism.  The 
circulation  obtained  by  a  Bank,  as  an  agent  of  government,  is  assigned  to 
it  before  the  stockholders  or  conductors  are  known.  The  shareholders 
receive  the  benefit  of  it,  as  a  matter  of  law  :  a  right  for  which  they  can  be 
under  no  obligation  to  any  department  of  government,  and  a  privilege  of 
which  they  have  no  reason  to  fear  the  privation.  Here,  there  is  no  room 
for  bribery,  or  corruption,  or  patronage  ;  while  the  large  capital  of  the 
Bank  affords  full  security  for  the  bills  held,  and  the  Bank  itself  assumes 
the  hazard  of  the  bills  of  all  other  institutions,  passing  through  its  agency 
for  account  of  government.  At  the  same  time,  the  trading  capital,  afforded 
by  the  average  amount  of  these  deposits,  and  of  this  government  circula- 
tion, through  the  instrumentality  of  the  Branches  of  the  Bank,  is  diffused 
over  the  whole  country — is  beneficially  felt  in  every  channel  of  trade — 
and  affords  to  the  general  mass  of  national  wealth,  all  that  increased  ac- 
cumulation which  its  interest  or  profit  is  capable  of  yielding. 


SECTION  V.. 

Operation  of  a  National  Bank,  in  bringing  forward  a  supply  of  Real 

Capital. 

We  are  now  to  consider  the  advantage  accruing  to  the  country  from 
the  additional  real  capital  brought,' as  we  may  say,  into  market  through  the 
agency  of  a  National  Bank,  both  at  home,  and  from  abroad ;  as  well  from 
subscriptions  to  its  own  stock,  as  from  the  confidence,  its  operations  are 
calculated  to  inspire  in  the  stability  of  other  moneyed  institutions. 

We  have  supposed,  throughout  these  remarks,  the  national  institution 
required  to  be  a  Bank  of  discount ;  because,  without  the  power  of  dis- 
counting both  bills  and  notes  in  the  common  sense  of  the  term,  it  can  ef- 
fect nothing  of  importance,  either  in  restoring  or  regulating  the  currency. 
We  have  supposed  also,  its  Capital  Stock,  to  be  ample,  that  the  several 
Branches  may  discount  largely  and  liberally,  and  even  lend  to  some  of  the 
Local  Banks  on  such  undoubted  security  as  they  may  be  able  to  furnish  ; 
and  also  to  afford  to  the  country  adequate  security  for  the  amount  of 
public  and  private  deposits,  and  its  own  issues.  We  must  further  suppose 
that  the  privileges  offered  by  the  charter  are  such  as  to  induce  capitalists, 
both  of  our  own  and  of  other  countries,  to  invest  their  funds  in  the  stock 
of  the  institution.  For  it  is  idle  to  suppose,  that  the  mere  passing  of  an 
act  to  incorporate  a  Bank,  will  bring  forward  the  funds  necessary  to  make 
up  the  capital ;  and  perhaps  the  opposers  of  such  an  institution  can  adopt 
no  surer  method,  for  preventing  its  going  into  operation,  than  that  of  di- 
minishing its  priviliges,  and  restricting  its  operations. 

Presuming  the  advantages  offered  by  the  charter  of  a  National  Bank  to 
be  such  as  to  induce  both  American  and  foreign  capitalists  to  invest  their 
money  in  the  stock,  the  benefit  thence  accruing  to  the  country,  is  that  of 
a  greater  competition  in  the  business  of  lending  money  ;  enabling  the  bor- 
rower to  obtain  it  more  easily,  and  on  better  terms. 

In  all  kinds  of  business,  every  man  wishes  to  prevent  others,  as  far  as 
possible,  from  coming  into  competition  with  him.  If  there  be  but  one 
person  having  a  certain  article  to  sell,  he  may  ask  what  price  he  pleases. 
If  there  be  two,  or  more,  there  is  so  much  probability  that  one  will  sell 
lower  than  the  other.  The  more  persons  there  are  to  sell  any  given 


46 

article,  and  the  more  there  is  of  it  to  be  sold,  the  sooner  it  will  reach  its 
lowest  possible  price.  Suppose  a  country  where  there  is  but  one  person, 
who  sells  grain,  no  other  person's  grain  being  allowed  to  come  into  the 
place  ;  the  people  of  this  country  must  give  whatever  price  this  seller 
may  ask.  But  suppose  the  law  to  be  altered,  and  other  farmers  or  dealers 
in  the  neighborhood  to  be  allowed  to  bring  in  their  grain  :  if  these  others 
be  disposed  to  sell  their  grain  lower,  the  price  falls.  This  competition 
with  traders  of  other  districts  brings  down  the  price  of  wheat,  and  bread 
becomes  so  much  cheaper.  The  first  dealer,  who  lately  sold  at  such  high 
prices  is  very  much  vexed,  no  doubt,  at  the  change  ;  and  supposing  him 
to  be  a  farmer,  if  he  hired  his  farm,  and  cannot  now  give  as  much  rent  as 
he  did  before,  his  landlord  is  as  much  vexed  as  he  is  ;  but  the  people  of 
the  place  have  every  reason  to  be  satisfied,  for  the  new  competition  hav- 
ing cheapened  the  article  of  bread,  every  one  is  able  to  live  so  much  the 
better  for  it. 

The  operation  is  the  same  with  capital.  If  there  be  but  one  person  in 
a  place,  having  money  to  lend,  he  will  demand  what  rate  of  interest  he 
pleases.  If  there  be  several  persons  to  lend,  some  will  sooner  or  later 
take  less  interest  than  others,  rather  than  incur  the  risk  of  having  their 
money  lie  idle.  The  more  lenders  of  money  there  are,  the  lower  must  be 
the  rate  of  interest. 

Suppose  a  country  where  there  is  only  a  certain  set  of  persons,  and  a 
certain  number  of  institutions  having  the  power  to  lend  money.  These 
lenders  finding  out  by  experience  how  much  their  capital  is  wanted,  and 
knowing  the  certainty  of  lending  it  at  a  particular  rate,  may  agree  together 
not  to  lend  below  that  rate.  Some  may  demand  more,  but  none  will  ask 
less,  and  so  long  as  all  that  is  to  be  lent,  can  be  lent  at  the  rate  supposed, 
these  lenders  have  no  occasion  to  reduce  their  price.  Now  suppose  an 
agent  of  a  number  of  wealthy  capitalists  in  a  distant  country,  to  come  into 
this  place  with  a  large  amount  of  money  to  lend,  the  owners  of  this  money 
being  willing  to  lend  at  a  much  lower  rate  than  that  which  had  previously 
been  established.  Here  is  a  new  competition  in  the  business  of  lending 
money.  The  price  of  interest  falls,  and  the  use  of  capital  is  obtained 
much  easier  than  it  was  before.  The  old  lenders  no  doubt  regret  the 
change,  they  cry  out  against  the  introduction  of  foreign  capital,  but  every 
one  who  has  occasion  to  borrow  money,  rejoices  at  it.  So  long  as  the 
borrower  procures  his  money  easier,  and  at  a  lower  rate,  and  can  make 
so  much  the  more  profit  out  of  it,  what  reason  has  he  to  regret  that  this 
money  has  been  brought  within  his  reach  from  distant  parts  ?  Shall  a 
borrower  refuse  to  make  a  profit  on  capital  offered  to  him  on  loan  because 
the  interest  to  be  paid  for  it,  goes  into  the  pocket  of  a  foreigner  ?  And 
why  should  a  borrower  be  compelled  to  pay  seven  per  cent,  per  annum,  in- 
terest, to  a  countryman,  when  he  can  obtain  the  use  of  the  same  money 
from  a  foreign  lender  for  four  or  five  per  cent. 

A  National  Bank  of  discount  stands  precisely  in  the  position  of  the 
agent  here  supposed.  Its  peculiar  advantages  induce  persons,  both  at 
home  and  abroad,  to  invest  their  money  in  its  stock.  Thus  bringing 
in  foreign  capital  from  all  directions,  and  introducing  a  competition  in  the 
business  of  lending  money,  which  did  not  before  exist.  This  competition 
is  the  very  opposite  of  what  is  called  a  monopoly. 

Monopoly  consists  in  confining  the  enjoyment  of  any  privilege  to  a 
limited  number  of  persons  or  institutions.  If  all  the  business  of  banking 
in  a  state,  be  confined  by  law,  to  one  hundred  Banks,  these  one  hundred 


47 

Banks  enjoy  a  monopoly  of  the  banking  business.  If,  on  the  contrary, 
the  business  be  thrown  open  to  all  ;  or  all  are  admitted  to  the  exercise  of 
the  privilege  upon  the  same  terms,  there  is  no  monopoly,  for  the  competi- 
tion is  unrestricted.  If  the  business  of  banking  be  confined  in  any  country, 
as  in  the  United  States,  to  the  State  Banks  alone,  then  these  State  Banks 
have  a  monopoly  of  it,  but  if  a  National  Bank  with  its  Branches  come  into 
competition  with  the  state  Banks,  this  monopoly  is  destroyed.  So,  if  there 
were  no  Bank,  or  Banks,  except  the  National,  with  its  Branches,  then  this 
National  Bank  would  enjoy  a  monopoly  ;  but  if  the  state  Banks,  come  into 
competition  with  the  National  Bank,  this  circumstance  destroys  the  mono- 
poly. If  in  any  state,  acts  of  incorporation  for  Banks,  are  granted  only  to 
individuals  of  a  certain  party,  then  that  party  may  be  said  to  possess  a  mo- 
nopoly of  this  corporation  granting  power  ;  but  if  such  charters  be  granted 
to  all  persons  on  equal  terms,  then  there  is  no  monopoly  for  the  competi- 
tion is  free.  The  term  Bank  monopolies  therefore,  sometimes  so  incon- 
siderately used,  is  altogether  inapplicable,  except  when  there  is  a  restric- 
tion on  the  competition  in  the  business  of  banking.  The  operation  of  a 
National  Bank,  then,  so  far  from  being  that  of  a  monopoly,  is  an  element 
of  that  competition  in  the  business  of  lending  money,  without  which,  a 
Bank  monopoly  might  be  said  in  some  degree  to  exist. 

Through  the  agency  of  a  National  Bank,  foreign  capital  comes  into 
competition  with  domestic  capital,  and  the  price  of  interest  is  kept  down 
if  not  reduced.  The  old  money  lenders,  and  the  state  Banks  may  regret 
this  competition,  but  every  one  who  borrows  money,  finds  a  benefit  from 
it.  True,  a  certain  amount  of  interest,  in  the  form  of  dividends,  may  be 
paid  to  foreigners  ;  but  the  profit  which  is  the  compensation  of  industry, 
and  enterprise,  and  the  emolument  of  labor  goes  to  enrich  the  country. 

Foreigners  lend  their  money,  in  the  way  supposed,  merely  because  they 
cannot  get  so  good  an  interest  at  home  ;  and  we  use  it,  because  it  enables 
us  to  borrow  cheaper  and  easier  than  we  could  do  otherwise.  Capital  is 
more  plenty,  and  the  use  of  it  is  at  a  lower  price  in  the  old  countries  than 
it  is  with  us,  and  it  is  sent  to  this  country  to  be  lent  out  here  on  the  same 
principle  that  we  send  or  would  send  our  wheat  and  flour  to  Great  Britain 
to  be  consumed  there.  Capital  seeks  employment  as  water  seeks  its  level ; 
and  thus  the  rate  of  interest  between  old  countries  and  new,  is  gradually 
equalized  to  the  advantage  of  both.  Not,  perhaps,  that  the  old  countries 
are  so  much  richer,  but  because  their  wealth  is  collected  into  larger  masses, 
and  held  by  fewer  hands.  It  is  more  difficult  for  one  person  to  find  em- 
ployment for  two  millions  of  dollars,  than  it  is  for  twenty  persons  to  em- 
ploy the  same  amount  profitably,  if  equally  divided  between  them,  or  near- 
ly so.  Besides  this,  in  the  old  countries,  if  the  capital  be  more,  the  en- 
terprise is  less  ;  the  distance  between  the  wealthy  classes  and  the  work- 
ing classes  is  greater ;  and  the  capitalist  and  the  operative  are  more  es- 
tranged from  each  other. 

A  Bank  of  the  United  States,  may  be  considered  a  kind  of  vehicle  by 
which  capital  is  brought  to  us  from  secret  recesses,  and  from  distant  coun- 
tries, to  be  employed  or  not  at  the  hazard  of  those  who  send  it.  If  we  do 
not  want  it,  we  shall  not  borrow  it,  nor  pay  interest  for  it ;  and  if  we  pay 
interest  for  it,  it  is  because  we  find  our  advantage  in  borrowing  it. 

But  it  is  not  only  through  the  instrumentality  of  its  own  stock,  that  a 
National  Bank  is  the  means  of  bringing  capital  into  the  market.  We  have 
seen  that  such  an  institution  must  operate  on  other  moneyed  institutions, 
so  as  to  secure  their  soundness  and  stability,  by  regulating  their  issues, 


48 

and  preventing  a  too  great  expansion  of  their  engagements.  In  doing  this, 
confidence  is  given  to  the  community  in  those  institutions  themselves. 
Capitalists  will  more  readily  invest  their  money  in  the  stocks  of  state 
Banks,  when  they  see  these  institutions  under  such  restriction  as  will  ef- 
fectually prevent  the  conductors  of  them  from  abusing  their  powers. 
Shareholders  of  Bank  stocks  are  generally  satisfied  with  dividends  equal 
to  the  legal  rate  of  interest,  provided  these  be  accompanied  with  a  persua- 
sion of  security  and  certainty  in  their  investments.  Their  interest 
requires  nothing  more  than  the  proper  legitimate  business  of  banking,  and 
whatever  may  have  been  the  wild  aspirations  of  some  conductors  of  Banks, 
it  has  been  rarely  the  case,  that  the  stockholders  have  been  benefited  by 
them.  On  the  contrary,  while  those  who  have  the  management  of  Banks, 
in  many  instances  may  go  out  of  the  usual  routine  of  their  business,  to 
promote  their  own  private  views  ;  the  stockholder,  with  scarcely  a  possi- 
bility of  being  benefited  by  a  speculative  operation,  is  sure  to  feel  the  full 
burthen  of  the  loss,  in  the  event  of  a  disasterous  result.  Hence  when 
banking  institutions  are  without  a  check,  when  these  directors,  or  officers 
may  extend  their  issues  without  limitation,  the  confidence  of  the  prudent 
stockholder  is  lost,  he  withdraws  his  capital  from  the  institution.  The 
chance  of  an  increased  dividend  being  no  temptation  to  him  ;  he  prefers 
placing  his  funds  where  they  will  be  safer,  even  if  the  prospect  of  pos- 
sible profit  be  less. 

Suppose  a  country,  where  there  are  several  hundred  Banks,  all  without 
any  other  check,  or  restraint,  than  that  of  the  degree  of  discretion  to  be 
found  amongst  their  directors  and  officers.  It  is  evident  that  whatever  the 
condition  of  these  institutions  may  really  be,  the  confidence  of  the  public 
will  be  shaken.  The  stockholder  will  manifest  his  want  of  confidence  by 
selling  out ;  the  depositor  by  diminishing  the  amount  he  keeps  on  hand  ; 
and  the  public  by  carrying  back  every  bill  to  its  proper  Bank  as  fast  as 
possible.  Whatever  course  capital  may  take,  it  will  fly  from  these  insti- 
tutions. It  will  sooner  seek  a  place  of  safety  in  foreign  countries,  with 
the  prospect  only  of  a  low  rate  of  interest,  than  abide  the  issue  of  such_a 
state  of  moneyed  affairs. 

Suppose  on  the  contrary,  amidst  such  a  state  of  things  a  National  Bank, 
properly  so  called,  to  be  established.  Its  operations  unavoidably  checking 
what  may  be  called,  any  tendency  to  a  monetary  licentuousness,  the  con- 
fidence of  capitalists  is  restored,  they  reinvest  their  money  in  the  stocks 
of  the  local  Banks,  because  they  can  depend  upon  their  better  man- 
agement. Their  dividends  may  be  smaller,  but  they  will  be  regular 
and  sufficient.  The  depositor  leaves  his  surplus  in  the  Bank  without  fear  \ 
and  the  public  keep  that  amount  in  circulation,  in  bank  paper,  without 
fear,  which  before,  was  so  hastily  exchanged  for  gold  and  silver.  Even 
the  foreigner  who  had  withdrawn  his  money  from  the  state  Banks,  now 
remits  it  again  to  the  country,  to  be  again  invested  in  their  stocks  ;  not 
because  he  believes  the  character  of  the  people  to  be  changed,  but  because 
he  knows  the  circumstances  of  the  country  to  be  changed.  The  opera- 
tion of  a  National  Bank  securing  to  him  the  stability  of  other  moneyed  in- 
stitutions, and  thus  restoring  his  confidence. 

This  is  not  a  mere  matter  of  theory,  experience  has  shown  us  that,  with 
the  operation  of  a  National  Bank,  confidence  in  other  Banking  Institutions 
has  been  unbounded  :  without  such  a  Bank  this  confidence  has  gradually 
disappeared,  giving  place  to  a  panic  fear,  and  a  general  withdrawal  of  real 
capital.  Such  then  being  the  operation  of  a  National  Bank,  directly,  by 


49 

its  own  stock,  and  indirectly  by  the  confidence  it  procures  in  the  opera- 
tions of  other  moneyed  institutions  ; — bringing  new  supplies  of  real  capi- 
tal into  market ;  increasing  the  competition  in  lending,  and  keeping  down 
the  rate  of  interest,  there  can  be  no  question  of  the  public  policy  to  be 
pursued  in  respect  to  it. 

In  every  country  the  borrowers  constitute  the  great  mass  of  the  people. 
In  nons  perhaps,  more  than  in  the  United  States,  not  on  account  of  the 
poverty  of  the  inhabitants,  but  on  account  of  the  room  for  enterprise  and 
industry  afforded  them.  Capital  is  more  in  demand  here,  because  more 
can  here  be  done  with  it.  The  working  classes  are  borrowers,  not  be- 
cause they  are  poor,  but  because  by  their  industry  and  enterprise,  with  the 
liberty  of  employment  so  abundantly  enjoyed,  they  can  all  of  them  obtain 
a  profit  from  capital,  over  and  above  the  interest  they  pay  for  it.  What- 
ever therefore,  diminishes  the  rate  of  interest  on  capital,  and  facilitates 
the  acquisition  of  the  use  of  it,  is  of  advantage  to  the  laboring  classes, 
and  through  them,  proportionally  beneficial  to  the  country  ;  because  it  is 
principally  by  the  additional  value,  exclusive  of  the  accumulation  of 
interest,  given  to  property,  by  labor  well  bestowed,  that  the  country  is 
enriched. 


SECTION  VI. 

The  operation  of  a  National  Bank  in  meeting  the  constitutional  requisition  ; 
that  "  all  duties,  imposts,  and  excises  shall  be  uniform  throughout  the 
United  States"  (See  Constitution,  Art.  1,  Sect.  8,  last  clause.) 

We  have  seen  in  the  course  of  the  preceding  remarks,  that  where  the 
paper  currency  of  the  country  is  dependant  upon  the  management  of  state 
Banks,  unchecked  by  the  regulation  of  a  National  Bank,  there  must  be  a 
depreciation  in  the  value  of  Bank  bills  : — greater  or  less,  in  proportion  as 
the  Banks  of  one  section  are  managed,  with  more  or  less  prudence,  than 
those  of  another.  Consequently  if  duties  and  taxes  be  paid  in  the  ordin- 
ary paper  currency  of  these  different  sections,  the  citizens  of  that  part  of 
the  country  where  Bank  paper  is  most  depreciated,  will  pay  less  duty 
than  those  of  other  portions  where  there  is  little  or  none  of  this  deprecia- 
tion ;  in  which  case,  the  revenue  suffers  an  actual  loss,  and  the  duties  and 
taxes  are  not  uniform.  This  is  not  merely  a  matter  of  argument,  it  is 
something  which  has  actually  occurred.  Previous  to  the  charter  of  the 
last  United  States  Bank,  and  subsequent  to  the  expiration  of  that  charter, 
this  state  of  things  has  actually  existed.*  The  only  remedy  for  this  evil, 
without  a  National  Bank,  is,  as  we  have  also  seen,  a  resort  to  hard  money 
requisitions,  and  an  entire  separation  of  the  public  moneys  from  those  of 
the  community.  This  remedy  too,  we  have  tried,  and  we  have  found  it 
worse  than  the  disease.  For  although  the  government  may  collect  its  re- 
venue in  this  way  without  loss,  the  nation  must  lose  the  benefit  to  be  derived 

*  Soon  after  the  late  war  with  England,  there  being  then  no  National  Bank,  the 
paper  currency  of  Maryland  being  about  twenty  per  cent,  lower  than  of  Massachu- 
setts; certain  merchants  of  Boston,  imported  their  goods  into  Baltimore,  that  they 
might  enjoy  the  privileges  of  a  citizen  of  Maryland,  by  paying  their  bonds  for  duties 
in  the  depreciated  bank  paper  of  that  city. 


50 

from  the  use  of  all  the  real  capital  afforded  by  the  government  deposits 
and  circulation. 

There  has  been,  it  is  true,  another  expedient  resorted  to.  Government 
has  on  former  occasions,  as  at  the  period  already  adverted  to,  issued  its 
own  bills,  termed  treasury  notes.  But  this  was  only  making  two  paper 
currencies  instead  of  one.  The  treasury  notes  proving  to  be  nearly  as 
various,  fluctuating  and  unstable  in  their  value,  as  the  Bank  bills  of  that 
period ;  being  only  something  not  quite  so  bad  as  Bank  bills,  and  not  so 
good  as  specie.  Besides  this,  it  is  evident,  that  the  payment  of  all  dues 
to  government  in  gold  and  silver;  or  gold,  silver,  and  treasury  notes,  can 
have  no  favourable  operation,  nor  produce  any  good  effect  upon  the  Bank 
currency  of  the  country.  It  did  not  formerly — it  cannot  do  so  at  any  time. 
Confidence  in  Bank  paper  cannot,  and  never  has  been  restored  by  it :  and 
so  long  as  this  confidence  is  wanting,  the  public  moneys  must  continue 
separated  from  thosfr  of  the  community ;  and  so  much  available  capital 
must  be  drawn  from  employment. 

It  is  a  common  error  to  suppose  that  government  is  called  upon,  in  such 
a  predicament  as  this,  to  create  a  currency — to  create  something  which  is 
to  take  the  place  between  gold  and  silver  on  the  one  hand,  and  the  paper 
of  the  state  Banks  on  the  other.  We  have  already  noticed  that  it  is  one 
thing  to  regulate,  and  quite  another  thing  to  create  currency.  The  regu- 
lation of  the  paper  currency  of  a  country,  by  bringing  all  Bank  bills  to  a 
specie  basis,  and  restraining  all  Bank  issues  to  the  representation  of  real 
capital,  has  a  happy  effect  in  restoring  confidence  to  the  community ;  and 
in  bringing  other  real  capital  from  its  hiding  places.  The  creation  of  a 
new  paper  currency,  in  the  midst  of  another  paper  currency  already  de- 
preciated, only  makes  bad  worse.  An  issue  of  treasury  notes  for  ex- 
ample, receivable  in  payment  of  government  claims  for  revenue,  being  in 
fact,  only  so  much  fictitious  capital  till  that  revenue  becomes  due.  Sup- 
pose the  United  States  government  to  issue  treasury  notes  at  this  time, 
based  upon  the  revenue  to  be  received.  This  is  only  creating  a  collateral 
paper  currency  in  addition  to  that  with  which  the  country  is  already  flood- 
ed :  making  the  artificial  value  of  property  already  existing  still  more  arti- 
ficial. A  proceeding  favorable  indeed,  to  the  purposes  of  speculators,  but 
very  far  from  favoring  the  laboring  classes  of  the  community. 

But  suppose  the  government  to  borrow  in  the  first  instance  several  mil- 
lions of  dollars,  in  specie,  in  order  to  enable  it  to  redeem  its  treasury 
notes  at  sight,  at  any  and  every  point  where  they  may  be  presented  ;  as  a 
Bank  without  capital  might  commence  business  by  borrowing  money,  per- 
haps at  a  disadvantage,  in  order  to  enable  it  to  pay  its  own  bills.*  In  the 
first  place,  the  specie  thus  taken  up  by  the  government,  is  an  abstraction 
of  so  much  real  capital,  a  great  part  of  which  must  be  kept  idle  ;  and  if 
by  this  arrangement,  the  treasury  notes  are  every  where  equal  to  specie, 
the  same  difficulty  still  remains.  The  treasury  notes  as  well  as  the  silver 
and  gold  must  be  kept  separate  from  the  Bank  paper  around  it.  Govern- 
ment vaults  and  safes  must  still  be  used.  The  Banks  will  still  continue 
their  unrestricted  issues.  Public  confidence  must  be  still  wanting,  and 
real  capital  whether  in  the  hands  of  government,  or  in  those  of  individuals, 
will  continue  to  seclude  itself  as  it  were,  for  safety. 

*  Such  conduct  in  a  Bank  would  be  considered  supremely  ridiculous,  how  far  it 
may  be  esteemed  otherwise  in  a  government,  must  be  left  for  its  advocates  to  de- 
monstrate. 


51 

If  instead  of  this,  the  treasury  notes  be  not  redeemable  every  where 
with  specie  ;  being  good  only  for  payments  to  the  government,  and  that 
only  when  those  payments  are  due  ;  in  some  parts  of  the  country  they 
must  be  even  more  depreciated  than  Bank  paper,  in  others,  less,  but  every 
where  they  only  add  to  the  general  confusion,  enabling  the  citizens  of  one 
part  of  the  country  to  pay  their  duties  and  taxes  at  a  lower  rate  than  those 
of  another  part. 

We  have  now  to  suppose  the  existence  and  operation  of  a  National 
Bank.  Here  again,  we  are  not  dependent  merely  upon  theory.  The  ex- 
periment has  been  tried.  Tried,  too,  more  than  once,  and  always  with 
success.  We  have  no  occasion  to  seek  out  a  new  state  of  things,  we 
have  only  to  go  back  to  that  organization  of  the  Banking  System  which 
prevailed  a  few  years  since,  and  with  which  the  country  has  been  perfectly 
familiar.  The  problem  to  be  solved  by  the  opposers  of  a  National  Bank, 
being  not  how  to  make  the  state  of  the  country  better  than  it  was  ten  years 
ago,  but  how  to  make  it  as  good  without  the  same  means.  By  the  opera- 
tions of  a  National  Bank,  the  issues  of  all  Banks  being  brought  down  to 
a  specie  basis,  the  exchanges  equalized,  public  confidence  restored,  real 
capital  introduced  in  the  place  of  fictitious,  and  a  safe  and  proper  agent 
provided  for  the  treasury,  any  separation  of  the  public  moneys  from  those 
of  the  community  becomes  unnecessary.  The  citizens  of  every  section 
and  state  in  the  country  are  enabled  to  pay  their  dues  to  the  government 
in  the  bills  of  their  respective  Banks  upon  equal  terms,  without  hazard  or 
disadvantage  to  the  public  interests,  and  without  that  inconvenience  and 
loss  of  power  in  capital,  which  unavoidably  results  from  a  hard  money 
system. 

In  this  way  a  National  Bank  of  discount  with  branches,  provides  for  the 
collection  and  safe  keeping  of  the  revenue,  and  for  the  uniformity  of  the 
public  burthens,  in  the  easiest,  safest  and  most  reasonable  manner ;  or,  to 
use  the  expression  of  the  Supreme  Court  upon  the  subject,  "  in  the  man- 
ner most  beneficial  to  the  people."  And  it  is  because  such  an  institution 
effects  this,  which  cannot  be  effected  in  any  other  way,  that  it  is  necessary 
and  proper,  and  being  so,  its  incorporation  is  constitutional. 

We  do  not  say  that  it  is  impossible  to  collect  the  revenue  without  a  Na- 
tional Bank.  We  know  that  it  is  possible  to  collect  it  under  a  specie  cir- 
culation in  gold  and  silver,  m  et  armis,  by  force  and  arms,  if  not  otherwise  : 
but  this  is  not  effecting  the  purposes  of  government,  "  in  the  manner  most 
beneficial  to  the  people."  We  know  the  inconvenience  of  a  hard  money 
collection,  we  know  the  impossibility  of  collecting  in  depreciated  paper 
with  uniformity  in  the  payment,  and  without  loss  to  the  government,  and 
we  know  the  perfect  inefficiency  of  treasury  note  issues  in  supplying  the 
place  of  a  well  regulated  Bank  currency.  On  the  other  hand,  we  know- 
by  forty  years  experience,  how  easily  all  difficulties  are  surmounted  through 
the  agency  of  a  National  Bank.  We  have  seen  during  that  period,  two 
such  institutions  successively  incorporated  and  in  operation  for  twenty 
years  each,  receiving  and  paying  the  public  moneys  without  the  loss  or 
even  a  serious  apprehension  of  the  loss  of  a  single  dollar  to  the  govern- 
ment, without  depriving  the  country  of  the  use  of  capital  derived  from  the 
government  deposits  or  circulations,  with  almost  a  perfect  equalization  of 
the  exchanges,  and  as  perfect  a  uniformity  in  payment  of  taxes  and  du- 
ties :  while  on  the  contrary,  no  sooner  has  the  country  been  deprived  of 
the  operations  of  a  National  Bank,  than  we  have  seen  fluctuations,  and  in- 
equalities immediately  taking  place,  driving  the  administrators  of  gorern- 


52 

merit  to  the  alternative,  of  collecting  and  keeping  the  revenue,  either  unequal- 
ly and  disadvantageously  in  paper  money,  or  harshly  and  distressingly,  alto- 
gether in  specie  ;  and  we  now  witness  a  period  when  for  want  of  such  a 
Bank,  confidence  at  home  and  abroad,  is  withdrawn  and  withdrawing  from 
all  our  moneyed  institutions,  real  capital  is  flying  for  protection  and  secu- 
rity to  other  countries  ;  and  the  government  is  more  and  more  involved  in 
the  necessity  of  separating  the  public  moneys  from  those  of  the  commu- 
nity, and  of  creating  an  artificial  currency,  almost  as  fluctuating,  and  as 
subject  to  depreciation  as  the  paper  currency  by  which  it  is  surrounded. 

Experience  and  theory  here  go  hand  in  hand,  we  have  only  to  enquire, 
what  was  the  state  of  our  moneyed  institutions  during  the  operation  of  our 
two  several  National  Banks,  what  was  then  the  state  of  public  confidence 
in  the  stability  of  the  paper  currency  ?  and  how  the  revenue  was  then 
collected  uniformly  throughout  the  United  States  ?  and  this  too,  without  a 
separation  of  the  government  moneys  from  those  of  the  people. 

The  facts  are  all  such  as  to  corroborate  the  arguments  here  made  use  of 
in  favor  of  a  National  Bank,  similar  to  those  of  which  we  have  heretofore 
enjoyed  the  benefit. 

NOTE. — It  is  not  designed  to  enter  into  a  legal  argument  here,  as  to  the  right  of 
Congress  to  establish  a  National  Bank.  Two  such  Banks,  as  almost  every  one 
knows,  have  been  successively  in  operation  in  this  country  ;  each  for  the  term  of 
twenty  years  ;  and  not  long  after  the  incorporation  of  the  last  of  these  two  Banks, 
the  question  of  the  constitutionality  of  its  charter,  was  carried  up  to  the  Supreme 
Court  of  the  United  States,  the  authority  of  which  court,  according  to  the  Constitu- 
tion, (Art.  3,  Sec.  2,)  being  decisive  in  all  matters  of  the  kind.  The  trial  was  of  the 
most  important  character  that  could  be  selected,  as  it  was  an  issue  between  a  sover- 
eign State  on  the  one  side,  and  the  National  Bank  on  the  other, — the  argument 
on  both  sides  being  conducted  by  perhaps  the  most  able  legal  counsel  at  that  time  to 
be  procured. 

The  following  decision  of  the  Bench,  delivered  by  Judge  Marshall, — himself  a 
Constitutional  veteran, — set  the  matter  at  rest,  with  regard  to  that  Bank,  (4  Whea- 
ton,  424) : 

"  After  the  most  deliberate  consideration,  it  is  the  unanimous  and  decided  opinion 
of  this  Court,  that  the  act  to  incorporate  the  Bank  of  the  United  States,  is  a  law  made 
in  pursuance  of  the  Constitution,  and  is  a  part  of  the  supreme  law  of  the  land." 

This  opinion  was  given  in  the  year  1819,  that  Bank  having  been  chartered 
April  10,  1816.  The  only  remaining  inquiry  is,  then,  whether  the  circumstances 
of  the  present  period,  are  such  that  the  incorporation  of  a  National  Bank  would  be  as 
constitutional  now,  as  it  was  then. 

Admitting  the  power  of  Congress  to  establish  a  Bank,  to  rest  principally  on  the 
provision  (Constitution,  Art.  1,  Sec.  8,)  to  make  all  laws  which  shall  be  necessary  and, 
proper  for  carrying  into  execution  the  express  powers  before  granted,  the  main  ques- 
tion presented  to  those  who  are  scrupulous  on  this  point,  is  whether  a  law  establish- 
ing a  National  Bank  be  at  this  lime  necessary  and  proper  for  carrying  into  effect  any 
of  the  powers  expressly  granted  to  Congress.  Whether,  for  example,  a  National 
Bank  be  necessary  and  proper  now,  to  enable  Congress  "  to  lay  and  collect  taxes,  du- 
ties, &c.,"  in  such  a  manner  as  that  "  all  duties,  imports  and  excises,  shall  be  uniform 
throughout  the  United  States." 

In  coming  to  a  decision  on  this  point,  we  are  to  adopt  the  rule  of  construction,  laid 
down  by  the  Supreme  Court  of  the  United  Stales,  in  the  case  above  refered  to,  that 
the  words  necessary  and  proper,  do  not  imply  an  absolute  necessity.  We  have  only 
to  inquire  whether  a  law  establishing  a  National  Bank,  (of  discount,  with  Branches,) 
be  reasonably  necessary  and  proper,  for  the  purpose  in  contemplation,  so  as  to  enable 
the  government  to  accomplish  that  purpose  inthe  safest,  most  convenient,  and  most 
equitable  manner;  (see  opinion  of  the  court,  4  Wheaton,  412—424.)  It  is  not  requi- 
site to  show  that  it  is  impossible  to  collect  the  revenue  without  such  a  National  Bank. 
All  that  the  Constitution  requires,  is  to  show  that  such  an  institution  is  reasonably 
necessary  and  proper,  or  appropriate  ,to  the  wants  of  the  government  in  this  respect  -t 
— necessary  and  proper,  because  the  matter  in  hand  can  be  accomplished  better  ia 
this  than  in  any  other  way. 


53 

On  this  point  we  are  to  bring  to  bear  our  experience  and  observation  of  the  diffi- 
culties and  disadvantages  arising  from  a  collection  of  public  dues  in  hard  money,  on 
the  one  hand,  and  in  paper  money,  without  a  National  Bank,  on  the  other  :  subjecting 
the  nation,  in  fehe  first  case,  to  an  immense  loss  of  available  capital,  and  in  the  last, 
to  the  unconstitutional  mode  of  levying  duties  and  taxes  unequally  in  different 
portions  of  the  country. 

How  far  such  a  Bank  as  is  under  contemplation,  may  be  necessary  and  proper  to 
meet  the  wants  of  the  government,  must,  in  the  nature  of  things,  be  a  matter  about 
which  the  legislative  branch  of  the  government  only  can  decide,  at  the  time  of  pass- 
ing the  act  of  incorporation. 

Upon  this  point,  the  following  opinion  of  the  Supreme  Court,  in  the  case  before 
cited,  is  abundantly  explicit : 

"  We  think  the  sound  construction  of  the  Constitution,  must  allow  to  the  national 
legislature  that  discretion,  with  respect  to  the  means  by  which  the  powers  it  confers 
are  to  be  carried  into  execution,  which  will  enable  that  body  to  perform  the  high 
duties  assigned  to  it,  in  the  manner  most  beneficial  to  the  people  " 

And  again,  (page  423):  "The  time  has  passed  away  when  it  can  be  necessary  to 
enter  into  any  discussion  in  order  to  prove  the  importance  of  this  instrument,  [a  Na- 
tional Bank,]  as  a  means  to  effect  the  legitimate  objects  of  the  government." 

."  But,  were  its  necessity  less  apparent,  none  can  deny  its  being  an  appropriate 
measure ;  and  if  it  is,  the  degree  of  its  necessity,  as  has  been  very  justly  observed,  is 
to  be  discussed  ia  another  place.  Should.  Congress,  in  the  execution  of  its  powers, 
adopt  measures  which  are  prohibited  by  the  Constitution — or  should  Congress,  under 
the  pretext  of  executing  its  powers,  pass  laws  for  the  accomplishment  of  objects  not 
entrusted  to  the  government — it  would  become  the  painful  duty  of  this  tribunal, 
should  a  case  requiring  such  a  decision  come  before  it,  to  say  that  such  a  law  was 
not  the  law  of  the  land.  But  where  the  law  is  not  prohibited,  and  is  really  calculated 
to  effect  any  of  the  objects  entrusted  to,  the  government,  to  undertake  here  to  inquire 
into  the  degree  of  its  necessity,  would  be  to  pass  the  line  which  circumscribes  the 
judicial  department,  and  to  tread  on  legislative  ground.  This  court  disclaims  all 
pretensions  to  such  power." 

It  has  been  accordingly  twice  decided  by  Congress,  as  is  evidenced  by  the  acts  of 
incorporation  of  1791,  and  1816,  approved  by  the  Chief  Magistrates  then  in  the  presi- 
dential chair,  that  a  National  Bank  of  discount,  with  Branches,  was  necessary.  We 
have  then  only  to  ask,  whether  the  institution  be  not  as  reasonably  necessary  and 
proper  now,  as  it  was  at  the  two  periods  when  the  two  former  Banks  were  incorpo- 
rated. If  it  be  so,  and  Congress  decide  that  it  be  so,  then  there  can  be  no  question  as 
to  the  constitutionality  of  the  law  giving  it  existence  ;  and  the  people  having  (by 
their  representatives)  decided  in  favor  of  the  necessary  and  proper  character  of  the 
institution,  the  act  of  incorporation  is  the  evidence  itself  of  this  decision,  and  thus 
bears  testimony  to  its  own  constitutionality. 

It  is  in  this  view,  especially,  that  it  becomes  important  for  the  people  to  inquire,  for 
themselves,  how,  and  in  what  manner,  a  National  Bank  is  a  suitable  instrument  of 
government,  and  in  what  manner  its  operations  are  beneficial  to  the  country — which 
is  the  inquiry  we  have  here  been  endeavoring  to  pursue. 


54 


PART    THIRD. 


OBJECTIONS  TO  A  NATIONAL  BANK. 


SECTION  I. 

Parties  having  an  Interest  in  Opposition  to  all  Banks,  or  any  new  Bank. 

The  advantage  of  Banks  generally,  and  the  usefulness  of  a  National 
Bank  being  such  as  have  been  here  set  forth,  let  us  inquire  what  class  of 
persons  may  be  supposed  to  object  to  either  one  or  the  other ;  and  what 
objections  they  may  reasonably  urge. 

The  operation  of  a  Bank,  as  we  have  seen,  is  to  bring  into  market  cap- 
ital otherwise  lying  dormant ;  thus  enabling  the  borrower  to  obtain  money 
more  easily,  and  reducing  the  rate  of  interest. 

If,  in  a  certain  city,  there  be  no  Bank,  all  the  business  of  lending  money 
will  be  in  the  hands  of  a  few  rich  men,  or  of  those  whom  they  may  em- 
ploy as  agents.  These  persons  very  naturally  object  to  the  establishment 
of  a  Bank.  They  think  there  is  no  need  of  more  capital.  They  think  the 
rate  of  interest  low  enough  already,  and  they  will  probably  exclaim  against 
the  Banking  System,  as  calculated  to  encourage  trading  on  what  they  call 
false  capital*  They  will  maintain  that  no  one  should  trade,  who  has  not 
money  of  his  own,  enough  and  to  spare,  unless  perhaps  he  borrow  of  them 
at  the  price  they  ask.  Their  interest  is,  as  they  may  think,  to  keep  all 
the  lending  business  in  their  own  hands  ;  and  hence  they  may  object  to  a 
Bank,  or  Banks.  [But  what  have  the  people  to  do  with  such  objections  as 
these  ? 

Banks  raise,  as  we  have  seen,  capital,  and  real  capital,  too,  from  their 
circulation.  The  rich  money-lender  may  jeer  at  this  circulation,  and  cry 
out  against  shin  plasters,  and  those  who  issue  them ;  but  the  mechanic, 
the  farmer,  the  trader,  the  borrowers  of  the  capital  thus  raised,  have  no 
reason  to  declaim  against  Banks.  A  Bank  raises  capital  from  the  propor- 
tion of  its  deposits,  lent  out  at  simple  interest.  The  money-lender  may 
call  this  loaning  the  property  of  others,  and  think  that  borrowers  would 
do  better  to  pay  him  a  higher  rate  of  interest,  because  he  lends  his  own 
money ;  but  the  borrower  from  the  Bank  has  no  reason  to  complain  ;  and 
so  long  as  depositors  are  willing  to  allow  their  money  to  be  used  in  this 
way,  no  one  can  have  reason  to  be  dissatisfied,  except  the  rich  money- 
lender, who  finds  the  Bank  a  competitor  in  his  business,  and  actually 
lending  lower  than  he  does. 

So  long  as  Banks  deal  only  with  real  capital,  the  laboring  classes  must 
be  benefited  by  their  operations.  They  have  only  to  be  watchful,  that  a 

*  See  distinction  drawn  between  fictitious  and  borrowed  capital,  page  10- 


55 

Bank  does  not  introduce  fictitious  capital  into  circulation  ;  because  this 
is,  in  effect,  a  fraud  upon  the  public,  necessarily  resulting  in  disaster, 
from  the  operation  of  which  the  laboring  classes  are  least  to  bfc  benefited, 
and  first  to  suffer  inconvenience. 

If  there  be  but  one  Bank  in  a  place,  that  institution  may  have  reason  to 
object  to  the  establishment  of  another  Bank  ;  for  the  new  Bank  may  take 
away  part  of  the  deposits,  and  occupy  part  of  the  circulation  of  the  old  Bank, 
and  the  opportunities  for  lending  money  may  be  divided.  The  same  with 
any  number  of  Banks  in  one  location  ;  they  will  regard  every  new  estab- 
lishment as  operating  against  them — as  an  interloper  creeping  into  their 
place,  and  diminishing  their  profits.  No  one  wants  a  new  competitor  in 
his  business  ;  and  as  the  rich  man  objects  to  the  establishment  of  any 
Bank,  where  he  is,  so  any  Bank,  or  Banks,  already  established,  may  ob- 
ject to  the  coming  in  of  a  new  Bank.  But  what  objection  can  the  people, 
or  can  borrowers,  have  to  such  an  additional  establishment  ?  Every  new 
Bank  bringing  in  new  capital,  and  more  money  to  lend ;  and  the  stock- 
holders taking  the  risk  whether  the  business  be  profitable  or  not,  those 
who  are  likely  to  borrow,  cannot  object.  The  laboring  classes  can  have 
no  interest  in  objecting;  for  the  more  capital,  the  greater  the  prospect  of 
employment.  The  people  cannot  object,  provided  only,  that  these  institu- 
tions, for  the  reasons  already  given,  be  prevented  from  introducing  ficti- 
tious capital. 

It  is,  indeed,  a  matter  of  surprise,  that  Banks,  properly  conducted,  ever 
should  have  been  considered  hostile  to  the  interest  of  the  poorer  and  la- 
boring classes,  the  fact  being  well  known,  that  by  means  of  bank  shares, 
the  smallest  capitalists  may  place  their  few  hundred  dollars  in  a  way  to 
obtain  a  safe  and  profitable  income  from  the  amount,  while  the  industrious 
workman,  or  the  enterprizing  trader,  through  the  same  means,  is  able  to 
obtain  so  much  the  more  easily,  the  use  of  the  small  additional  capital,  at 
any  time  required  to  fulfill  his  engagements. 

Rich  men  may  borrow  of  rich  men.  He  who  wishes  to  borrow  his  ten 
or  twenty  thousand  dollars,  and  has  abundant  security  to  offer  for  it,  may 
make  arrangements  for  a  loan  with  his  wealthy  neighbor;  but  the  laboring 
man,  the  artizan,  the  mechanic,  the  house-keeper,  the  small  trader,  will 
not  be  able  to  borrow  his  two  or  three,  or  five  hundred  dollars,  without  a 
Bank.  So,  without  a  Bank,  the  small  trader  can  scarcely  obtain  credit, 
because  his  note  cannot  be  discounted  as  it  would  be  by  an  institution, 
preferring,  perhaps,  the  discounting  of  notes  of  small  amount,  and  requiring 
only  a  good  reputation  on  the  part  of  the  promiser.  Even  the  day-laborer, 
where  there  are  no  Banks,  may  find  half  his  time  unemployed,  and  his 
daily  pay  reduced,  because  there  is  not  capital  enough  within  reach  of  the 
enterprizing  contractors,  upon  whom  he  depends  for  occupation.  Banks, 
therefore,  so  far  from  being  engines,  or  organs,  of  the  rich,  are  just  the  in- 
stitutions of  which  the  rich  only  have  reason  to  complain.  They  are,  in 
fact,  inventions  enabling  the  poor  to  do  wtihout  the  rich  ;  and  it  is  for  this 
reason  that  they  are  most  useful  in  countries  of  which  the  population  is 
composed  principally  of  the  middling  classes  ;  enterprizing  and  industri- 
ous, but  in  want  of  capital. 

These  classes,  then,  not  only  have  no  reason  to  object  to  the  establish- 
ment of  Banks,  but  they  have  great  reason  to  advocate  their  existence, 
and  even  to  favor  their  multiplication,  provided  they  are  subject  to  such  a 
check  as  will  prevent  their  creating  fictitious  capital. 


56 

SECTION  II. 

Interests  opposed  to  a  National  Bank — the  case  0/RiCH  MEN,  and 
MONEY  DEALERS. 

Let  us  now  suppose  a  National  Bank  to  be  about  being  organized,  cal- 
culated precisely  as  we  have  represented  it  to  be,  to  bring  forward  new- 
supplies  of  real  capital,  to  equalize  the  Exchanges,  and  to  regulate  the 
issues  of  other  Banks  ;  what  class  of  persons  may  reasonably  object  to 
such  an  institution,  and  what  objections  may  they  urge  ? 

The  rich  man  may  object,  as  we  suppose  him  to  have  done  before,  and 
for  the  same  reasons.  Tell  him  that  a  National  Bank  will  bring  new  cap- 
ital into  the  country  ;  he  will  say  there  is  capital  enough  here  already. 
He  will  be  for  prohibiting  the  introduction  of  foreign  capital,  and  may  talk 
of  the  duty  of  encouraging  our  own  capitalists,  and  the  patriotism  of  fos- 
tering and  using  only  our  own  means.  Tell  him  that  the  operations  of  a 
National  Bank  will  tend  to  keep  down  the  interest  of  money.  He  will 
say, "  this  is  the  very  thing  1  am  afraid  of."  He  thinks  the  rate  of  interest 
already  too  low.  He  wants  no  Banks  to  come  into  competition  with  him 
in  the  business  of  lending,  and  least  of  all  a  National  Bank.  Tell  him 
that  such  an  institution  will  prevent  other  Banks  from  extending  their  busi- 
ness, and  multiplying  their  issues,  beyond  their  proper  limits.  He  is  per- 
haps at  this  time  a  holder  of  bank  stock,  and  is  afraid  that  his  dividends 
will  be  diminished.  Or  tell  him  that  a  National  Bank  will  prevent  the 
moneyed  institutions  of  the  country,  generally,  from  creating  fictitious 
capital,  and  giving  an  artificial  value  to  every  kind  of  property.  He  may 
consider  this  as  operating  particularly  against  his  own  interests.  He  has 
immense  property  to  sell,  and  comparatively  nothing  that  he  is  obliged  to 
purchase.  What  he  has  to  dispose  of  will  sell  at  so  much  higher  prices, 
in  proportion  as  the  currency  is  depreciated.  His  property  will  be  doubled, 
trebled,  quadrupled,  according  as  the  Banks  are  allowed  to  extend  them- 
selves without  limit,  and  he  trusts  to  his  own  sagacity  to  make  sales  at 
high  prices,  in  time  to  place  his  money  in  something  not  liable  to  suffer 
by  the  subsequent  reaction.  He  has  every  thing  to  gain  by  a  derange- 
ment of  the  currency,  and  nothing,  as  he  thinks,  to  lose  by  it.  Tell  him 
that  a  National  Bank  will  bring  the  paper  currency  to  its  proper  level,  and 
prices  of  all  kinds  to  their  proper  and  proportional  specie  standard :  he 
will  prefer  having  his  large  estates  remain  at  their  existing  high  valuation, 
although  he  knows  this  value  to  be  in  a  great  degree  fictitious.  What 
desire  can  he  have  to  regulate  the  currency?  "  Let  well  alone,"  he  will 
say,  "  I  am  satisfied  with  things  as  they  are." 

The  position  of  the  people  must  certainly  be  very  different  from  this. 
The  rich  man,  especially  if  he  be  at  the  same  time  a  great  speculator,  may 
object  with  some  reason  to  a  National  Bank ;  but  the  laboring  man,  the 
artizan,  and  small  capitalist,  have  all  a  different  interest  to  provide  for. 
How  small,  then,  must  be  the  number  of  objectors,  on  this  score,  in  com- 
parison with  the  great  mass  of  the  people. 

The  dealer  in  Bank  Bills,  and  in  domestic  exchanges  may  object  to  the 
establishment  of  a  National  Bank.  He  wants  no  competition,  like  the 
Branch  of  a  National  Bank,  to  take  part  of  his  business  out  of  his  hands. 


57 

He  wants  no  equalization  of  the  currency,  bringing  the  Bank  bills  of  Ala- 
bama and  Georgia,  almost  to  a  level  with  those  of  New  York.  He  will 
call  this  taking  the  bread  out  of  his  mouth.  Confusion  and  instability  iu 
the  currency,  are  the  elements  of  his  harvest.  The  profits  of  his  busi- 
ness are  to  be  estimated  in  proportion  to  the  inequalites  and  uncertainties 
of  the  rates  of  exchange.  Tell  him  that  a  United  States  Bank,  such  as 
it  should  to  be,  will  collect  money  from  all  parts,  and  in  all  parts  of  the 
country  cheaper  and  quicker,  than  it  could  be  collected  in  any  other  way  ; 
and  you  will  represent  it  to  him,  as  of  all  things,  one  of  the  last  establish- 
ments for  him  to  promote.  The  dealer  in  exchanges,  and  the  changer  of 
paper  money,  we  admit,  may  have  some  reason  to  object,  but  what  have 
the  people  to  do  with  their  objections  ? 

If  the  greatest  difference  between  the  values  of  the  bills  of  different 
Banks,  or  between  the  values  of  the  Bank,  money  of  different  states,  do 
not  exceed  one  per  cent.,  the  exchanger  of  this  money  cannot  make  a 
profit  in  any  case  exceeding  one  per  cent.,  but  if  the  difference  be  ten  or 
fifteen  per  cent.,  there  is  so  much  more  room,  and  so  much  better  chance 
for  him  to  make  two  or  three  per  cent.,  or  more,  instead  of  one. 

If  there  be  but  one  person  in  a  town,  whose  business  it  is  to  exchange 
Bank  bills,  he  will  ask  his  own  prices,  and  make  so  much  better  profit,  he 
will  not  of  course,  wish  another  person  to  take  up  the  business  in  his 
neighborhood  ;  so  if  there  be  several  engaged  in  the  same  business,  although 
the  rates  may  be  reduced  by  competition,  none  of  these  persons  would 
wish  to  have  a  Bank  established  in  their  neighborhood,  especially  if  the 
Bank  effected  these  exchanges  at  a  lower  rate  than  they  could. 

Suppose  in  each  of  these  twenty-six  United  States,  one  hundred  per- 
sons, whose  business  it  is  to  deal  in  the  bills  of  exchange  and  Bank  paper 
of  the  different  states.  Here  will  be  twenty-six  hundred  persons  in  the 
whole  country,  having  the  reason  just  given,  for  opposing  the  establishment 
of  a  National  Bank.  The  greater  the  difference  in  exchanges,  the  bet- 
ter for  them.  A  National  Bank  diminishes  the  difference ;  leaving 
them  room  perhaps,  for  scarcely  more  'than  one  quarter  or  one  half  per 
cent,  profit.  "  What's  the  use  of  a  National  Bank  ?"  they  will  say,  "  We 
can  manage  the  exchanges  :"  "  Let  trade  regulate  itself."  What's  the  use 
of  canals  ?  the  waggoner  may  say,  with  as  much  reason.  Leave  the  trans- 
portation of  goods  to  us.  What's  the  use  of  railroads  ?  says  the  stage 
coach  driver, "  Leave  the  carriage  of  passengers  to  us  :  we  can  manage  it : 
let  trade  regulate  itself."  But  the  merchant  who  has  sold  his  goods  to 
dealers  in  distant  sections  of  the  country,  sees  the  use  of  equalizing 
and  giving  stability  to  the  exchanges ;  and  the  dealer,  who  comes 
from  a  distant  state,  to  purchase  goods,  and  is  obliged  to  change  his  money 
at  a  loss  of  five,  ten,  or  fifteen  per  cent.,  sees  the  use  of  a  National  Bank. 

The  exchanger  of  money  is  able  to  make  a  mystery  of  his  art.  He  ob- 
tains the  best  information  he  can  as  to  the  state  of  the  several  Banks  ; 
and  as  to  the  changes  expected  to  take  place  in  their  management.  The 
dealer  in  merchandize  cannot  obtain  this  information.  His  ignorance 
subjects  him  to  anxiety,  and  he  sells  his  bills  at  the  best  price  he  can  ob- 
tain, and  the  greater  the  depreciation  in  the  bills  he  has,  the  more  he  is  at 
the  mercy  of  the  exchanger. 

Nor  is  the  seller  or  buyer  of  goods  the  only  party  concerned  in  this 
loss.  The  consumer  has  eventually  to  pay  for  it.  The  loss  in  exchanging 
money  being  as  direct  a  charge  upon  the  goods  consumed  as  the  expen- 
ses of  transportation.  Every  one  who  eats,  and  drinks,  and  wears  clothes, 

8 


58 

and  needs  the  shelter  of  a  house,  having  the  same  kind  of  interest  in 
equalizing  the  currency,  by  the  aid  of  a  National  Bank,  that  he  has  in  fa- 
cilitating the  transportation  of  merchandize,  by  the  aid  of  rail  roads  and 
canals.  While  then  the  interest  of  the  twenty-six  hundred  persons,  en- 
gaged in  changing  money,  may  be  opposed  to  the  establishment  of  a  Bank, 
the  interest  of  ten  millions  of  consumers,  and  of  hundreds  of  thousands 
of  traders,  throughout  the  country,  is  directly  and  urgently  in  favor  of  it. 

SECTION  III.       * 

Case  of  Sellers  of  Foreign  Exchange. 

There  are  certain  objectors,  few  in  number,  but  of  a  very  respectable 
class,  who  have  really  no  disposition  to  oppose  the  establishment  of  a  Na- 
tional Bank,  provided  it  does  not  deal  in  foreign  bills  of  exchange. 

If  a  National  Bank  with  its  immense  capital,  sell  its  own  bills,  or  bills 
with  its  own  endorsement,  these  bills  of  course  will  generally  command  a 
preference  over  those  of  individuals,  or  of  private  banking  institutions. 
These  last,  being  known  to  be  good  only  to  comparatively  a  small  number 
of  persons,  while  the  bills  of  a  National  Bank  are  known,  or  believed  to 
be  good  by  all  persons,  almost  in  all  parts  of  the  world.  Such  was  the 
case  with  the  bills  of  the  late  United  States  Bank,  properly  so  called  ;  and 
such  no  doubt  would  be  the  case  with  any  other  National  Bank  properly 
organized  and  conducted. 

This  preference  however,  after  all,  is  in  general,  but  a  mere  matter  of  a 
quarter  or  half  per  cent,  difference,  affecting  more  the  vanity  or  mercan- 
tile pride  of  the  individual  drawer  of  bills,  than  his  real  iaterest.  The 
Bank  too,  in  consequence  of  its  extensive  arrangements,  may  sometimes 
be  able  to  sell  bills  lower  than  other  drawers,  and  sometimes  its  opera- 
tions in  this  portion  of  trade  may  interfere  with  the  interests  of  those  who 
derive  an  emolument  from  the  business  of  buying  and  selling  foreign  ex- 
change ;  but  if  the  seller  of  private  bills  be  aggrieved,  the  buyer  of  ex- 
change it  is  to  be  remembered,  is  benefited  ;  and  the  lower  foreign  exchange 
is  obtained,  the  lower  goods  may  be  imported,  and  the  cheaper  the  consu- 
mer will  be  supplied.  It  is  only,  however,  a  portion  of  the  sellers  of  for- 
eign bills,  who  have  reason  to  complain  ;  for  a  large  part  of  the  drawers 
and  sellers  are  accommodated  by  it ;  being  enabled  to  sell  their  exchange  to 
the  Bank,  at  times  when  perhaps  they  could  not  dispose  of  it  otherwise, 
without  some  undesirable  hazard,  or,  without  a  sacrifice  in  price.  The 
operations  of  the  Bank  tending  to  moderate  the  action  of  the  market ;  pre- 
venting the  rate  of  exchange  from  rising  too  high  at  one  time,  and  from 
falling  too  low  at  another.  These  two  extremes  being  equally  undesirable, 
as  it  is  the  same  with  exchange  as  with  the  necessaries  of  life.  Too  high 
a  rate  must  be  followed  by  an  inordinate  supply,  reducing  the  rate  too 
low ;  and  too  low  a  rate,  being  inevitably  followed  by  a  scarcity  which  again 
causes  an  unreasonable  increase  of  price. 

The  operation  of  foreign  exchange  is  the  same,  in  this  respect,  as  that 
of  domestic  already  alluded  to.  If  the  products  of  this  country  could  be 
sent  abroad,  precisely  at  the  time,  when,  and  in  proportion  as,  those  of 
other  countries  are  brought  this  way  ;  so  that  every  one  thousand  dollars 
worth  of  cotton,  or  flour,  or  tobacco,  could  meet  its  exact  amount  in  dry 
goods,  hardware,  &c.,  there  would  be  little  or  no  accomodation  required  in 
bills  of  exchange  ;  but  we  know  that  the  crops  of  this  country  must  be 


shipped  at  a  certain  season  ;  and  we  know  that  the  goods  we  import  must 
be  procured  at  certain  other  seasons.  The  proceeds  therefore  of  our  cot- 
ton, or  flour,  might  not  be  wanted  to  pay  for  the  foreign  goods  imported 
against  them,  till  six  or  eight  months  after  the  crop  is  brought  in.  The 
grower  would  then  be  obliged  to  wait  this  period  for  his  money,  were  it 
not  for  this  process  by  which  through  bills  of  exchange,  these  two 
amounts  are  made  to  meet  each  other.  The  planter  draws  upon  his  fac- 
tor, allowing  ample  time  for  the  sale  or  shipment  of  his  cotton  ;  obtains 
the  money  for  his  draft,  and  is  then  in  funds  for  his  crop,  as  soon  as  it  is 
grown.  The  factor  waits  for  the  moment  of  demand,  and  sells  the  cotton 
on  credit  to  the  shipping  merchant,  whose  note  he  gets  discounted  in  time 
to  meet  his  acceptance  of  the  planter's  draft.  The  shipping  merchant 
again  having  credit,  waits  till  the  proper  time  for  shipping,  and  then  draws 
his  foreign  bill  of  exchange,  so  as  to  leave  ample  time  for  it  to  meet  the 
proceeds  of  the  cotton.  But  the  shipper  of  cotton  at  Mobile,  or  New 
Orleans,  meets  with  no  one  there  in  want  of  a  bill  of  exchange  to  remit 
for  foreign  goods.  If  there  be  a  Branch  Bank  at  either  of  these  places, 
dealing  in  foreign  bills  of  exchange,  he  sells  his  bills  to  this  Branch,  and 
receives  the  money  in  time  to  pay  the  note  given  for  the  cotton.  The 
Branch  at  New  Orleans  sends  the  bills  to  the  Branch  at  New  York,  here 
the  bill  is  kept  till  it  is  wanted,  and  called  for ;  that  is,  till  remittances  are 
wanted  to  meet  the  dry  goods,  &c.,  ordered.  The  time  elapsing  between 
the  coming  in  of  a  crop,  and  the  moment  when  its  amount  is  wanted,  to 
pay  for  the  foreign  product,  in  return,  is  thus  divided  between  the  several 
parties.  All  are  accommodated  with  funds,  while  all  are  enabled  to  wait 
the  proper  time,  either  for  selling  or  buying ;  and  this  with  the  smallest 
possible  loss  of  time  or  expense.  The  case  is  the  same,  if  the  process 
be  reversed.  If  the  goods  imported,  be  brought  in  first,  the  importer  looks 
to  the  coming  crop  for  the  means  of  meeting  a  remittance.  He  applies  to 
the  planter,  whose  crop  has  not  yet  gone  to  the  shipping  port.  The  factor 
has  not  received  the  cotton  to  be  sold,  and  the  shipping  merchant  cannot 
yet  buy  the  cotton  upon  which  he  should  draw.  The  importer  then  ap- 
plies to  the  Branch  Bank  in  his  neighborhood.  The  Bank  has  no  bills 
at  the  moment,  but  it  will  have  a  supply  when  the  crops  come  in,  and  are 
sold,  in  the  meantime  it  has  an  ample  credit  abroad.  The  Bank  there- 
fore furnishes  the  importer  in  advance  with  those  funds,  which  are  to  come 
out  of  the  next  crop  some  months  afterwards.  Having  done  this,  the 
Bank  is  so  much  more  disposed  to  buy  the  bills  of  the  shipping  merchants, 
and  the  shipping  merchant  is  so  much  better  enabled  to  pay  the  factor, 
and  the  factor  so  much  more  ready  to  accommodate  the  planter.  Either 
way  the  process  is  calculated  to  make  the  greatest  possible  saving  of  time 
and  expense,  while  it  brings  the  wants  of  the  consumer  of  foreign  pro- 
ducts, and  the  wants  of  the  producer  of  domestic  products,  to  meet  each 
other  in  respect  to  time,  as  it  were,  half  way.  Who  are  the  parties  most 
benefited.  Evidently,  those  at  the  two  extremes.  Every  facility,  and  every 
saving  of  time,  and  expense  in  the  intermediate  stages  of  this  process 
being  calculated  to  enable  the  planter  to  obtain  a  better  price  for  his  cot- 
ton, and  the  consumer  to  obtain  his  goods  at  lower  rates.* 

*  The  American  grower  of  cotton,  for  example,  whose  products  are  sent  to  Eng- 
land, being  in  this  matter,  at  one  extreme,  and  the  American  consumer  of  English 
goods,  being  at  the  other 'extreme.  The  American  consumer  depending  upon  the 
American  producer,  to  pay  for  what  he  consumes  ;  and  the  American  producer  de- 
pending upon  the  American  consumer  for  the  pay  of  what  he  produces,  it  becomes 
the  interest  of  these  two  parties  to  diminish  all  intermediate  charges  or  expenses. 


60 

If  there  were  no  United  States  Bank  and  Branches,  the  process  would 
be  nearly  the  same,  except  that  what  we  have  supposed  to  be  done  by  a 
Branch  Bank,  would  be  done  by  individual  merchants,  or  Bankers,  who 
could  not  do  it  generally  speaking,  with  the  same  ease  or  to  the  same  ex- 
tent ;  and  who  could  not  afford  to  do  it,  and  would  not  be  willing  to  do  it 
without  some  additional  charge,  which  a  Branch  Bank  would  not  make. 
Whatever  this  additional  charge  be,  and  whatever  additional  loss  of  time 
there  may  be,  this  charge,  and  this  loss  is  so  much  to  be  divided  between 
the  parties  at  the  two  extremes.  The  producer  having  so  much  less  to 
receive  for  his  crop,  and  the  consumer  so  much  more  to  pay  for  the  foreign 
articles  of  which  he  makes  use.  We  have  then  only  to  compare  the  num- 
ber of  individuals  losing  a  commission  or  per  centage,  by  this  competition 
of  a  National  Bank,  on  the  one  side,  with  the  number  of  producers  and 
consumers  benefited  by  it  on  the  other. 

It  may  be  admitted,  however,  that  for  the  purpose  of  regulating  the  cur- 
rency, and  of  performing  the  duties  of  a  government  agent,  it  is  not  di- 
rectly necessary  that  the  Bank  should  be  a  dealer  in  foreign  exchange.  It 
is  one  thing  to  equalize  the  exchanges  between  the  several  United  States, 
and  another  thing  to  equalize  the  exchange  between  the  United  States  and 
foreign  countries.  It  may  not  be  directly  necessary  indeed,  that  a  National 
Bank  should  be  a  dealer  or  speculator  in  any  thing.  The  Bank  may  col- 
lect drafts,  and  discount  their  amount,  and  charge  its  per  centage  for  col- 
lecting to  meet  the  difference  of  exchange  and  expense,  leaving  it  for  or- 
dinary competition  to  reduce  this  per  centage  to  its  lowest  rate.  In  such 
case,  if  the  stockholder  do  not  gain  as  he  might  do,  by  buying  and  selling, 
he  will  not  on  the  other  hand,  incur  the  chance  of  loss.  So  in  the  case  of 
foreign  exchange,  the  Bank  may  discount,  and  collect  it,  or  sell  it, 
charging  only  the  interest,  and  the  actual  expense,  or  loss  incurred,  but 
this  would  not  meet  the  objection  of  its  opposers  here  :  the  objection  in 
the  case  supposed,  being  not  that  the  Bank  makes  a  profit  by  foreign  ex- 
changes, but  that  it  does  the  business  cheaper  than  individuals  can  do  it  ; 
and  so  prevents  them  from  making  their  usnal  profit  out  of  it. 

On  the  other  hand,  although  it  may  not  be  directly  necessary  for  the  Bank 
to  deal  in  foreign  exchange,  it  may  be  indirectly  so.  If  this  privilege 
like  others  already  mentioned,  be  necessary  to  induce  capitalists  to  sub- 
scribe for  its  stock  ;  this  might  be  a  sufficient  reason.  For  a  National 
Bank  can  effect  none  of  the  purposes  for  which  it  is  required,  without  an 
ample  capital,  and  it  cannot  obtain  this  capital,  unless  its  charter  afford 
sufficient  inducements  to  prompt  those,  who  have  money  to  spare,  to  invest 
it  in  the  stock. 

Independent  of  this,  there  is  a  further  reason,  why  the  Bank  should  pos- 
sess the  faculty  of  dealing  in  foreign  exchanges.  We  have  seen  that 
there  must  be  a  certain  lapse  of  time  between  the  period,  when  foreign 
products  are  taken  up  for  this  country,  and  a  period  when  the  crops 
of  this  country  reach  the  point  where  they  meet  these  products.  There 
are  periods  when  in  the  natural  course  of  trade,  there  may  be  neither 
produce  nor  exchange  going  forward  to  meet  the  foreign  imports 
coming  this  way.  At  these  moments  to  supply  the  deficiency,  ship- 
ments of  specie  must  be  resorted  to.  Large  shipments  of  specie  call- 
ed for  unexpectedly,  produce  embarrassment  and  alarm,  on  the  part  of 
the  local  Banks,  frequently  indeed  unnecessary.  This  alarm  often  be- 
comes a  panic,  the  paper  currency  is  affected,  and  the  whole  community 
is  inconvenienced.  At  such  a  moment  a  National  Bank,  with  a  large 


61 

credit  abroad,  is  able  to  furnish  an  amount  of  exchange  in  anticipation  of 
of  the  next  crop.  This  exchange  goes  forward  instead  of  the  specie  that 
would  otherwise  be  sent.  The  expense,  and  loss  of  time,  incident  to 
transporting  the  precious  metals,  is  saved  to  the  country  ;  the  inconve- 
nience of  a  pressure  is  saved  to  the  local  Banks ;  the  paper  currency  is 
not  affected  ;  and  no  panic  or  alarm  occurs.  Meantime  the  Bank  is  able 
to  wait  till  the  crops  come  in,  and  are  sent  forward,  when  it  purchases  the 
bills  of  shippers  to  reimburse  the  amount  previously  drawn  for,  in  antici- 
pation. The  whole  community  are  thus  accommodated  ;  and  even  the  indi- 
vidual dealears  in  foreign  exchange,  who  have  had  some  reason  to  com- 
plain of  this  competition,  rind  an  important  advantage  in  the  arrangement. 
Their  own  operations  being  carried  on  with  so  much  the  greater  facility, 
while  the  supply  of  foreign  exchange,  afforded  by  such  an  institution, 
modifies  the  call  for  specie,  for  even  the  most  distant  quarters  of  the 
world  ;  insuring  greater  confidence  in  the  local  Banks,  and  more  stability 
in  the  currency. 

It  is  not  for  the  interest  of  the  stockholders  of  a  Bank,  however,  that  it 
should  be  allowed  to  speculate  in  any  thing.  Its  proper  business  is  strictly 
and  simply  that  of  lending  money  ;  and  its  dealing  in  foreign  and  domestic 
Exchange,  is  only  one  form  of  this  business  of  lending.  If  it  lend  money 
on  bills  of  exchange,  it  must  have  the  means  of  getting  this  money  back  ; 
and  this  is  to  be  done  by  drawing  its  own  bills,  or  selling  those  in  its  pos- 
session. The  Bank,  in  the  mean  time,  charging  no  more  than  sufficient 
to  cover  the  extra  expense  and  loss  of  time  to  whieh  it  may  be  exposed. 
If  the  Bank  cannot  draw  and  sell  its  bills,  it  cannot  lend  money  on  bills.  A 
Branch,  for  example,  cannot,  in  such  case,  lend  money  at  Charleston, 
Savannah,  or  New  Orleans,  on  the  bills  of  shippers  of  cotton,  and  remit 
those  bills  to  the  Bank  at  New  York,  to  be  there  sold  or  remitted,  and 
drawn  for.  This  business  will  then  be  done  through  the  intervention  of 
third  persons,  and  it  is  evident  how  very  small"  must  be  the  number  of  per- 
sons thus  benefited  by  the  restriction  on  the  Bank,  in  comparison  with  the 
number  of  those  to  whom  it  is  an  occasion  of  serious  inconvenience  and 
loss. 

NOTE.— Keeping  in  view  the  position,  that  the  proper  business  of  a  Bank,  and  es- 
pecially of  a  National  Bank,  is  that  of  lending  money  only,  all  objections  to  such  a 
National  Institution,  arising  from  the  supposition  of  its  engaging  in  speculations,  are 
set  aside.  They  do  not  belong  to  the  case.  A  National  Bank  is  not  necessarily 
a  dealer  or  speculator,  and  it  is  no  difficult  matter  so  to  frame  its  charter  as 
to  prevent  such  an  abuse  of  its  powers;  while  the  restriction,  the  stronger  it  is, 
will  be  the  more  fully  satisfactory  to  those  who  subscribe  to  its  stock— the  sharehold- 
ers aiming  especially  at  a  safe  investment  of  their  capital,  with  moderate  but  regular 
dividends. 


SECTION  IV. 

Interests  of  State  or  Local  Banks,  in  opposition  to  a  National  Bank. 

The  officers,  directors,  and  stockholders,  of  State  or  Local  Banks,  may 
object  to  the  establishment  of  a  National  Bank. 

These  persons  may  suppose  it  to  be  for  the  interest  of  their  institutions, 
to  monopolize  the  banking  business  as  far  as  they  can.  They  have  the 
same  general  objection  to  a  National  Bank,  which  we  have  supposed  rich 
men  to  have  to  them.  They  want  no  more  competition  in  the  business  of 


62 

lending  money.     They,  too,  will  say  there  is  capital  enough  in  the  country 
— their  capitals  are  enough. 

Besides  this,  wherever  a  National  Bank,  or  one  of  its  Branches,  is  es- 
tablished, it  must  take  up  some  of  the  deposits  and  circulation  of  the  other 
Banks.  The  several  Banks  of  a  city  cannot,  for  this  reason,  look  with  a 
favorable  eye  upon  the  introduction  of  a  Branch  Bank ;  and  the  more 
money  this  Branch  has  to  lend,  the  worse  they  think  it  will  be  for  them. 
Those  who  make  their  deposits  in  the  Branch,  finding  a  preference  on 
that  account  in  obtaining  loans,  withdraw  their  deposits  in  whole  or  in  part 
from  the  State  Banks,  to  place  them  in  the  National  Bank ;  and  if  they 
borrow  money  of  the  Branch,  they  will  receive  the  amount,  or  a  large  part 
of  it,  in  the  bills  of  the  National  Institution  ;  and  as  these  get  into  circu- 
lation, they  must  occupy  the  place,  in  some  degree,  of  the  bills  of  the  other 
Banks. 

As,  then,  the  profits  of  a  Bank  are  in  proportion  to  the  amount  of  its  de- 
posits and  circulation,  and  as  the  establishment  of  a  National  Bank  of  dis- 
count, with  Branches,  may  be  supposed  in  this  way  to  diminish  the  profits 
of  the  State  Banks,  these  have  here  some  reason  for  objecting  to  the  es- 
tablishment of  such  an  institution.  But  what  have  the  people  to  do  with 
this  objection  ?  What  have  the  laboring  classes  to  do  with  it  ?  The  great 
mass  of  the  people  can  have  no  direct  interest  in  bank  stocks  ;  and  even 
the  interest  of  the  stockholders  themselves,  is  small,  in  the  matter  of  their 
profits,  in  comparison  with  that  which  they  have  in  the  general  prosperity 
of  the  country — in  the  stability  of  all  kinds  of  property — in  the  regulation 
of  the  currency — and  in  the  reduction  of  the  exchanges, — as  owners,  as 
buyers  and  sellers,  and  as  consumers.  The  disadvantage,  too,  which 
holders  of  bank  stock  might,  in  the  case  supposed,  experience  from  a  di- 
minution of  their  dividends,  must  be  more  than  compensated  by  the  secu- 
rity given  to  their  investments  in  the  several  Banking  Institutions  in  which 
they  are  interested. 

But  some  of  the  Banks  have  another  interest  at  stake  in  this  matter, 
distinct  from,  and  even  opposed  to,  the  interest  of  the  people. 

These  are  the  Banks  inclined,  or  Urged,  to  extend  themselves  improp- 
erly. The  officers  are  disposed  to  lend  largely,  that,  their  customers  being 
accommodated,  they  may  themselves  be  the  more  popular,  and  their  insti- 
tution appear  in  a  more  flourishing  condition.  Some,  too,  may  have  their 
own  speculations,  or  those  of  their  friends,  to  favor.  The  directors  are, 
for  the  most  part,  in  business.  They  wish  to  borrow  more  and  more. 
They  receive  no  compensation,  except  the  loans  they  procure  from  their 
Banks.  Every  thousand  dollars  a  director  is  able  to  borrow,  may  afford 
him  a  certain  per  centage  of  profit ;  and  the  only  pay  he  receives  is  this 
profit  on  the  amount  of  capital  thus  at  his  disposal.  A  director  may  not 
borrow  because  he  is  needy,  but  because  the  more  he  borrows,  the  greater, 
•he  supposes,  will  be  the  profits  of  his  business.  He  has  besides,  in  his 
ordinary  dealings,  his  set  of  customers,  to  whom  he  sells,  whose  credit  it 
is  his  interest  to  sustain,  and  to  whom  it  is  desirable  for  him  to  grant  facil- 
ities, that  they  may  give  the  better  prices  for  the  goods  he  sells  them.  He 
may  be  a  commission  merchant,  too,  and  the  greater  advances  he  can 
make,  the  greater  the  amount  of  consignments  he  may  receive. 

The  same  may  be  the  case  with  the  customers  of  a  Bank ;  their  ac- 
counts are  valuable,  because  they  keep  large  balances  in  the  Bank  to  their 
credit ;  and  it  is  necessary  to  acceed  to  their  demands,  or  they  will  with- 
draw their  accounts,  and  go  to  some  other  Bank,  where  they  expect  more 


accommodation.  Or  perhaps  they  are  stockholders,  and  may  use  their 
influence  at  the  next  election,  in  favor  of  a  board  more  disposed  to  meet 
their  wishes.  Some  borrowers,  too,  obtain  money  from  their  Banks,  on 
condition  of  circulating  the  bills  in  distant  parts  of  the  country,  from 
whence  they  cannot  be  expected  to  return  very  speedily. 

The  conductors  and  customers  of  Banks,  thus  influenced,  wish  to  be 
unshackled  in  their  proceedings.  They  are  for  the  largest  liberty,  particu- 
larly for  themselves.  They  profess  to  see  no  use  in  a  National  Bank. 
They  scoff  at  the  idea  of  a  great  regulator,  as  they  call  it.  Represent  to 
them  a  National  Bank  acting  as  a  check  upon  other  Banks,  and  they  ex- 
claim against  it  as  a  MONSTER.  They  will  vociferate  about  state  rights; 
as  if  state  rights  consisted  in  the  right  of  State  Banks  to  issue  paper  money 
never  to  be  redeemed.  Their  cry  is  give,  give.  Let  them  be  told  that  their 
Bank  cannot  lend  all  they  ask  for,  because  it  has  to  check  with  the  Branch 
of  the  National  Bank  in  its  neighborhood,  and  will  be  called  upon  to  fur- 
nish specie  for  any  excess  of  its  own  bills,  already  perhaps  exceeding  their 
proper  limits. — Who  wants  to  be  hampered  in  this  way  ?  they  say.  "  Down 
with  monopoly— down  with  the  monster."  Their  language  and  their  opin- 
ion, perhaps,  may  be  that  their  city,  or  their  town,  would  be  the  greatest 
in  the  world,  if  it  were  not,  as  they  say,  for  the  United  States  Bank. 

This  is  perfectly  natural.  It  is  perfectly  natural  that  such  Banks,  and 
such  persons,  should  be  opposed  to  any  thing  like  a  check  or  regulator. 
But  these  persons  are  not  the  people.  They  are  not  even  the  majority  of 
the  borrowers  at  their  own  Banks.  It  will  generally  be  found  that  Banks 
thus  over  urged,  are  so  by  a  small  number  of  large  borrowers — persons  of 
grasping,  monopolizing  views,  distinct  from  the  numerous  class  of  small 
traders,  to  whom  Banks,  in  general,  are  most  useful. 

Banking  Institutions,  satisfied  with  business  to  the  extent  of  their 
means,  and  never  issuing  bills  or  obligations  beyond  their  ability  to  re- 
deem, have  nothing  to  apprehend  from  the  restrictive  operation  of  a  Na- 
tional Bank.  No  more  than  an  individual  who  never  signs  a  note,  or 
contracts  a  debt,  beyond  his  ability  and  inclination  to  pay,  has  any  thing 
to  fear  from  the  process  of  the  law.  A  National  Bank,  in  checking  the 
issues  of  State  Banks,  can  go  no  farther  than  calling  upon  each  to  pay  its 
own  debts;  and  this  is  no  more  than  they  are  bound,  upon  every  principle 
of  justice  and  equity,  to  do.  But  this,  the  objectors  may  say,  is  just  what 
they  wish  to  provide  against,,.  Our  Banks,  they  may  say,  are  not  always 
able  to  pay  .their  notes  ;  and  when  this  is  the  case,  they  do  not  wish  their 
inability  to  be  known.  If  they  cannot  pay,  the  longer  they  can  keep  their 
weakness  concealed,  the  better  for  them  and  for  us.  We  shall  be  able  to 
borrow  so  much  the  more,  and  so  much  the  longer,  without  being  called 
upon  ourselves,  and  betraying  our  weakness. 

But  what  have  the  people,  especially  the  laboring  classes,  to  do  with 
objections  of  this  kind  ?  Suppose  that  of  seven  hundred  and  fifty  Banks 
in  the  United  States,  five  hundred  are  conducted  in  this  way  ;  and  that  of 
» these  five  hundred,  fifty  of  the  directors  and  customers  of  each,  urge  the 
objections  above  alluded  to.  Here  we  have,  in  all  the  United  States, 
twenty-five  thousand  persona  objecting  to  a  certain  public  institution,  be- 
cause it  interferes  with  their  private  interests  ;  while  on  the  other  hand, 
there  are  more  than  fifteen  millions  of  persons  whose  interests  imperatively 
require  the  establishment  of  this  very  institution. 

Let  us  suppose  a  case.  A  few  persons,  having  a  powerful  influence 
with  certain  Banks,  enter  into  a  speculation  in  wheat,  flour,  &c.  They 


64 

buy  up  these  articles  as  far  as  their  ordinary  means,  and  credit,  will  ex- 
tend. Having  bought,  in  the  first  instance,  in  expectation  of  a  rise,  they 
must  now  buy  to  make  their  own  expectations  good.  There  is  no  National 
Bank  to  operate  as  a  check  upon  other  Banks.  These  institutions  are, 
therefore,  abundantly  liberal.  Credit  is  unbounded.  Most  of  the  bread 
stuffs  of  the  country  are  bought  up,  or  are  in  the  hands  of  those  who  think 
they  may  as  well  profit  by  what  is  going  on,  as  the  speculators  themselves. 
The  warehouses  of  the  city  are  full,  as  well  as  the  granaries  in  the  towns 
and  villages  ;  and  multitudes  of  stacks  of  grain  are  to  be  met  with  all 
over  the  country.  Still  there  is  a  great  talk  of  scarcity,  and  almost  a  fam- 
ine is  apprehended.  But  the  higher  the  prices  rise,  the  higher  these 
holders  expect  the  prices  will  rise.  Every  thing  now  depends  upon  the 
Banks.  There  is  yet  some  months  before  another  crop  can  come  in.  As 
long  as  the  Banks  do  not  call  upon  the  borrowers,  these  borrowers  will 
not  be  obliged  to  sell  any  part  of  the  stock  they  have  accumulated.  The 
distress  with  the  poorer  classes  increases — the  prices  of  wheat,  and  flour, 
and  corn,  are  doubled  — but  speculators  are  not  obliged  to  sell,  and  there- 
fore will  not  sell.  Riots  ensue,  and  even  the  warehouses  are  sacked  by 
the  populace  for  bread. 

In  the  midst  of  this  state  of  things,  supplies  come  in  from  abroad.  Our 
speculators  cannot  control  the  foreign  market,  as  they  have  done  their 
own  ;  a  different  class  of  sellers  spring  up ;  competition  takes  place,  and 
prices  fall.  Speculators  and  other  traders  are  ruined  ;  and  even  the  farmer, 
who  has  been  hoarding  up  his  crop,  is  obliged  to  sell  at  last  at  less  than 
the  ordinary  price,  with  the  loss  perhaps  of  a  year's  toil  and  pains  and 
anxiety,  in  attempting  to  sustain  a  monopoly.  Thus  we  find  the  distress 
of  consumers,  and  the  ruin  of  speculators,  and  the  heavy  loss  of  others,  all 
originating  with  the  too  abundant  liberality  of  a  few  unrestrained  Banking 
Institutions.  Had  the  Banks  in  question  been  otherwise  situated — had 
they  been  subject  to  the  check  of  a  National  Bank — these  speculators 
could  not  have  counted  upon  such  extraordinary  facility.  This  monopoly 
of  bread  stuffs  would  not  have  taken  place,  the  trader  would  not  have  been 
ruined  ;  the  farmer  would  not  have  been  subjected  to  loss  or  inconve- 
nience ;  and  the  poor  would  not  have  been  distressed  for  the  want  of 
bread.  The  case  supposed,  is  but  an  example  of  many  of  a  similar  char- 
acter, all  tending  to  show  the  necessity  of  a  National  Bank,  to  protect  the 
mass  of  the  people,  as  consumers,  from  extravagant  prices — and  even  to 
protect  the  reckless  or  imprudent  speculator  against  himself. 

There  may  be  other  Banking  Institutions,  though  few  in  number,  with 
which  there  is  a  further  objection  to  a  National  Bank. 

As  it  is  advantageous  to  every  Bank  to  increase  the  number  of  its  depos- 
itors, so  it  may  be  desirable  with  any  of  them  to  become  the  agents  of 
government,  and  thereby  to  obtain  a  share  of  the  public  deposits,  and  a 
share  of  the  government  circulation. 

A  large  proportion  of  the  State  Banks  are  not  so  situated  as  to  expect 
these  privileges ;  but  some  may  expect  them,  so  long  as  there  is  no  National 
Institution  established  for  this  purpose.  When  a  National  Bank  is  in  op- 
eration, the  moneys  belonging  to  the  nation,  or  what  are  called  the  govern- 
ment deposits,  are  placed  of  course  with  that  Bank,  or  with  its  Branches. 
These  Branches  receiving  the  funds  of  government  wherever  collected, 
and  paying  the  debts  contracted  by  government,  wherever  due,  have  the 
opportunity  of  putting  into  circulation  the  bills  of  the  Bank,  as  well  as  the 


65 

advantage  of  discounting  upon  a  proportion  of  the  government  deposits  at 
any  time  on  hand. 

If  there  be  no  National  Bank,  these  public  moneys,  unless  the  hard 
money  system  be  adopted,  will  be  distributed  amongst  certain  State  Banks, 
affording  them  the  opportunity  of  using  the  government  funds,  and  of  issu- 
ing their  own  bills  in  payment  of  government  debts — increasing  their  cir- 
culation, and  augmenting  their  ability  to  lend  to  their  particular  customers. 
The  stockholders  of  such  Banks  may  be  benefited  by  the  increased  profits 
of  their  institutions,  provided  this  money  be  employed  with  good  faith, 
and  loaned  on  good  security.  The  officers  will  be  benefited  by  the  in- 
creased business  and  greater  popularity  of  their  institutions  ;  affording 
them  better  salaries,  and  procuring  them  greater  influence  with  the  com- 
munity. The  directors  and  large  borrowers  of  these  Banks  will  be  bene- 
fited, as  they  think,  in  proportion  as  the  loan  of  these  public  moneys  is 
divided  amongst  them.  It  is  perfectly  natural  for  persons  thus  interested, 
to  be  opposed  to  the  establishment  of  a  National  Bank ;  but  how  many 
persons  are  there  of  this  description  throughout  the  country  ? 

Without  a  National  Institution,  for  receiving,  keeping,  and  paying 
the  public  moneys,  this  charge  might  devolve  upon  one,  two,  or  three 
Banks  in  each  State.  We  may  suppose,  therefore,  fifty  Banks  to  be  thus 
privileged,  in  the  whole  country.  Many  others  may  aspire  to  the  ap- 
pointment ;  but  of  the  whole  eight  hundred  Banks  in  the  United  States, 
not  more  than  fifty  can  have  in  reality  this  interest  at  stake.  To  each  of 
these  Banks  we  may  allot  one  hundred  persons — officers,  directors,  and 
heavy  borrowers — who  may  be  supposed  to  divide  the  spoils  between 
them  ;  for  smaller  customers  will  scarcely  perceive  the  difference,  in  the 
accommodation  they  obtain.  There  are,  then,  five  thousand  persons,  in 
the  whole  nation,  who  may  be  supposed  to  have  a  direct  interest,  of  the 
kind  here  alluded  to,  in  opposing  the  establishment  of  a  National  Bank. 
These  persons  will  maintain  that  a  Government  Bank,  or  a  Fiscal  Agent, 
of  any  kind,  is  unnecessary.  Their  Banks  can  keep  the  government  de- 
posits, and  receive  and  pay  out  the  public  moneys  ;  and  they  will  do  it 
without  asking  a  compensation  ?  These  persons  may  be  loud  talkers,  and 
stirring  politicians,  because  their  private  interests  excite  them  to  action. 
But  what  is  the  interest  of  these  five  thousand  persons,  or  even  fifty 
thousand,  if  there  were  so  many,  in  comparison  with  the  opposite  interest 
of  the  seventeen  millions  constituting  the  whole  population  of  the  country. 

As  to  the  stockholders  of  these  fifty  Banks,  experience,  as  well  as 
common  sense,  shows  us  that  wherever,  and  whenever,  a  Bank  has  a 
larger  amount  of  money  to  loan  out,  than  its  position  in  the  community 
renders  expedient,  extraordinary  hazards  are  incured  ;  and  it  is  the  stock- 
holders who  have  to  take  these  hazards.  Where  a  local  Bank  has  a  large 
amount  of  public  moneys  to  loan  out,  its  bad  debts  more  than  equal  the 
extra  amount  of  interest  collected.  The  interest  of  the  permanent  stock- 
holder is,  therefore,  decidedly  opposed  to  the  enjoyment  of  any  extraor- 
dinary powers  on  the  part  of  the  conductors  of  his  institution  :  for  his 
whole  investment  may  be  swept  away,  or  nearly  so,  by  the  too  great  fa- 
cility with  which  borrowers  are  accommodated.* 

*  We  say  the  permanent  stockholder,  because,  as  to  the  mere  contractor  to  buy 
or  sell  stocks,  it  may  be  as  much  for  his  interests  at  one  time  to  ruin  an  institution, 
as  at  another  to  promote  its  success.  He  contracts  to  deliver  stock  at  some  future 
period  at  a  certain  price,  it  is  then  desirable  for  him  to  injure  the  institution,  in  its 
circumstances,  in  its  character,  or  both,  in  order  that  within  the  appointed  time  he 
9 


66 

There  may  be  other  Banks  in  some  parts  of  the  country,  having  sus- 
pended specie  payments,  without  a  prospect  of  ever  being  able  to  resume 
them,  which  enjoy  a  credit  from  the  mere  circumstance  that,  as  none  of 
the  surrounding  Banks  pay  specie,  the  difference  between  those  having 
means,  and  those  having  none,  cannot  be  tested.  The  introduction  of  a 
National  Bank  would  speedily  make  this  difference  known  ;  a  better  paper 
currency  would  be  introduced,  to  which  their  own  circulation  must  give 
place  ;  their  deposits  would  be  withdrawn,  and  their  affairs  would  neces- 
sarily be  brought  to  a  close.  The  customers  of  these  Banks  very  naturally 
argue,  that  if  the  institutions  to  which  they  are  in  debt  are  constrained  to 
close  their  concerns,  the  accommodation  they  have  hitherto  obtained  must 
cease,  and  they  themselves  must  liquidate  their  affairs,  and  perhaps  betray 
their  own  insolvency. 

On  the  other  hand,  there  may  be  some  individuals  connected  with  spe- 
cie paying  Banks,  who  presume  upon  the  superior  solidity  of  these  estab- 
lishments— calculating  that  the  more  confusion  and  uncertainty  there  is  in 
the  paper  currency  generally,  and  the  greater  the  want  of  confidence  in 
other  institutions,  the  greater  the  advantage  resulting  to  their  own.  Such 
persons  have  no  objection  to  the  rigid  action  of  a  National  Bank.  They 
wish  to  see  all  weaker  institutions  taken  out  of  the  way.  The  smaller 
the  number  of  Banks  remaining,  the  better  for  them.  They  favor,  therefore, 
the  passage  of  a  National  Bankrupt  Law,  to  act  upon  all  State  Institutions. 
Something  that  will  destroy  without  building  up  — something  that  will 
remove  one  kind  of  competition,  without  substituting  another  in  its  place. 
The  proposition  at  the  same  time  meeting  the  argument  in  favor  of  efforts 
for  a  National  Bank,  that  something  must  be  done  ;  while  it  opposes  these 
efforts  by  making,  what  might  be  called  in  military  tactics,  a  skilful  di- 
version. Even  statesmen,  from  portions  of  the  country  where  Banks  enjoy 
the  highest  credit,  may  make  similar  calculations  ;  but  these  are  not  cal- 
culations for  the  general  good.  They  are  local  and  individual  reasons, 
operating  either  very  partially,  or  only  with  the  few.  The  question  the 
people  have  to  consider  is,  how  much  these  local  and  individual  objections 
are  to  weigh,  when  balanced  with  the  interest  of  the  whole  nation. 

may  purchase  the  stock  he  has  to  deliver  at  a  price  so  much  lower.  Such  an  indi- 
vidual compasses  sea  and  land  to  obtain  his  object,  and  if,  perchance,  he  has 
engaged  in  this  manner  to  deliver  the  stock  of  a  National  Institution,  however  con- 
vinced he  may  be  that  its  existence  is  essential  to  the  welfare  of  the  country,  he  will 
join  any  party  in  destroying  it,  in  order  to  make  a  few  thousand  dollars  upon  his 
contract,  and  this  object  being  accomplished  he  must  afterwards  maintain  his  repre- 
sentations with  pertinacity  in  order  to  justify  the  course  pursued.  Certainly  the  in- 
terests of  such  persons  are  not  to  be  taken  into  consideration  in  weighing  the  ad- 
vantages to  the  country  of  a  National  Bank. 


NOTE. — Amongst  other  objections  to  a  National  Bank  it  has  been  urged  that  it  is  a 
Monopoly, — an  objection  already  partially  noticed,  [Sect.  V.  Part  II.] 

The  only  view  in  which  it  can  be  thus  considered,  is  that  of  its  being  the  deposi- 
tory of  the  public  moneys,  and  its  acting  as  the  Fiscal  Agent  of  the  government,  in 
which  capacity  it  may  be  said  to  monopolize  the  advantages  incident  to  the  dis- 
charge of  its  peculiar  functions. 

In  this  respect  the  National  Treasury  may  be  called  a  monopoly,  for  the  Bank  is 
only  the  agent  of  the  treasury,  with  the  difference  that  by  means  of  its  numerous 
Branches  it  diffuses  the  use  of  the  public  funds  over  the  whole  union ;  while  it 
guarantees  the  treasury  from  any  loss  resulting  from  their  employment. 

The  opposite  of  a  monopoly  is  sometimes  equally  participated  in  by  all.  To  avoid  any 
monopoly  of  the  advantages  in  question,  the  use  of  the  public  moneys  must  be  equally 
divided  amongst  all  the  citizens.  For  if  any  number  of  these  citizens  less  than  the 


67 

whole,  enjoy  the  privilege  of  paying  and  receiving  the  public  funds,  this  number 
must  possess  a  monopoly.  But  the  state  Banks  say  "  This  is  absurd — we  ought  to  be 
the  depositories  of  the  government  money."  In  that  case  the  state  Banks  will  pos- 
sess a  monopoly  ;  and  as  there  are  eight  hundred  or  one  thousand  of  these  Banks, 
they  must  all  enjoy  an  equal  share  of  the  public  moneys,  or  else  there  will  be  a  mo- 
nopoly by  some,  not  enjoyed  by  the  others.  Is  the  use  of  the  public  treasure  then 
to  be  divided  amongst  these  eight  hundred  or  one  thousand  Banks  1  This  again,  it 
will  be  said,  is  absurd.  Suppose  we  select  two  Banks  in  each  state  :  making  about 
fifty  state  Banks,  agents  of  the  government.  These  fifty  Banks  will  then  enjoy  a 
monopoly  of  these  privileges,  whatever  they  n?ay  be.  In  such  case,  will  not  the 
other  seven  hundred  and  fifty  Banks  have  reason  to  complain  1  A  monopoly  of  some 
kind,  therefore,  we  see  in  the  nature  of  things  is  unavoidable.  The  question  then  is 
whether  it  be  not  better  to  give  it  to  a  National  Bank, — chartered  by  Congress, — 
paying  a  bonus  to  the  Nation  for  its  privileges, — accountable  to  the  nation  for  its 
conduct, — possessing  ample  capital, — acting  through  its  branches  in  all  the  states, 
and  yielding  to  the  nation  a  portion  of  its  profits — than  to  give  this  monopoly  to  a 
certain  number  of  state  Banks,  or  banking  associations, — paying  no  bonus  to  the 
nation, — not  being  accountable,  or  amenable,  to  the  national  government, — having 
insufficient  capitals,  not  responsible  for  each  other,  and  yielding  no  share  of  their 
profits  to  the  public  treasury. 

In  the  incorporation  of  a  National  Bank,  the  capital  stock  is  thrown  into  the  mar- 
ket, free  for  the  subscription  of  all,  its  privileges  being  fully  made  known,  and  any 
one  being  permitted  to  subscribe  for  any  amount,  from  one  share  upwards;  whatever 
the  monopoly  may  be,  all  have  the  opportunity  of  coming  in  for  a  share  of  it,  who 
choose  to  do  so — an  arrangement  as  near  to  an  equal  distribution  of  privileges  to 
every  citizen  as  can  be  attained.  On  the  other  hand,  if  there  be  no  such  Bank  in- 
corporated, the  public  moneys,  unless  locked  up  in  sub-treasury  vaults,  or  something 
of  the  same  kind,  must  be  distributed  at  the  will  of  the  President,  to  such  Banks  as 
he  may  see  fit  to  favor,  thus,  in  fact,  enabling  this  officer,  whoever  he  may  be,  to 
grant  a  monopoly  to  whom  he  pleases — which,  in  fact,  would  be  the  result,  although 
the  operation  may  be  indirectly  performed  through  the  Treasury  Department,  and 
the  grant  made  to  certain  incorporated  state  institutions. 

The  use  of  the  public  moneys  cannot  be  divided  amongst  all  the  citizens,  nor 
shared  amongst  al)  the  State  Banks.  It  cannot  be  given  to  any  number  of  Banks 
without  giving  reason  to  others  to  complain.  It  cannot  be  left  at  the  disposition  of 
the  president,  without  giving  him  a  monopoly,  and  thus  endangering  the  liberties  of 
the  country  ;  and  it  cannot  be  locked  up  in 'sub-treasury  vaults,  or  in  the  vaults  of 
a  Fiscal  Agent,  without  the  loss  of  so  much  useful  capital  to  the  nation,  and'proving 
a  monopoly  of  the  worst  kind.  If  then,  a  National  Bank  be  a  monopoly,  it  is  cer- 
tainly less  exceptionable  than  any  other. 

Let  the  people  enquire  who  it  is  that  complains  of  this  monopoly.  They  will 
not  find  that  they  themselves  have  any  reason  to  make  this  complaint.  They  will 
not  find  that  a  large  majority  even  of  the  Banks,  look  upon  the  matter  in  this  light. 
But  they  may  find  that  certain  individuals,  and  certain  Banks,  are  forward  to  cry 
out  against  a  National  Bank,  as  a  monopoly,  because  apparently  it  keeps,  as  they 
suppose,  the  money  of  the  nation  from  coming  under  their  own  control. 

SECTION  V. 

Objection  arising  from  a  supposed  hostility  of  the  PEOPLE  to  a  National 
Bank,  and  to  all  Banks. 

We  have  now  taken  a  view  of  the  several  interesfs  opposed  to  the  es- 
tablishment of  Banks  generally,  and  of  a  National  Bank  particularly. 

We  have  seen  that  it  is  only  the  rich  money  lender,  or  his  agent,  who 
can  have  a  real  interest  opposed  to  the  operation  of  Banks.  The  rich 
man  may  naturally  wish  to  monopolize  the  business  of  lending  money  : 
and  the  agent  may  wish  all  borrowers  to  obtain  the  supply  of  their  wants 
through  him.  If  it  be  found,  in  fact,  that  neither  the  rich  man,  nor  the 
agent,  do  object  to  Banks,  it  is  because  they  have  long  since  learned  that 
their  opposition  would  be  entirely  useless.  They,  therefore,  are  obliged 
to  conform  to  the  existing  state  of  things,  the  one  investing  some  of  his 


68 

spare  funds  in  stocks ;  and  the  other  dealing  in  stocks,  instead  of  dealing 
in  the  lending  of  money. 

We  have  seen  it  to  be  the  interest  of  the  people,  especially  of  the  labor- 
ing and  enterprising  classes,  and  of  all  consumers,  to  promote  the  estab- 
lishment of  Banks,  properly  regulated;  on  account  of  the  real  capital,  they 
are  capable  of  bringing  into  market ;  and  on  account  of  the  effect  of  their 
competition  in  keeping  down  the  rate  of  interest.  On  the  other  hand,  we 
have  noticed  some  of  the  disasterous  consequences  of  a  want  of  this  pro- 
per regulation  ;  as  it  is  exhibited  in  the  creation,  expansion,  and  sudden 
dissolution  of  fictitious  capital  ;  and  we  have  seen  in  what  manner  a  Na- 
tional Bank  is  calculated  to  effect,  and  to  maintain  the  regulation  required, 
so  as  to  preserve  to  the  country  all  the  advantage  of  the  local  Banking 
System,  without  the  hazard  of  its  abuses. 

We  have  been  thus  led  to  search  for  the  interests,  supposed  to  be  in  op- 
position to  the  establishment  of  a  national  institution  apparently  so  de- 
sirable. 

We  have  seen  that  rich  money  lenders,  and  their  agents  may  have  the 
same  interest  in  opposing  the  establishment  of  a  National  Bank,  that  they 
have  had  to  the  operation  of  all  Banks.  They  want  nothing  to  keep  down 
the  interest  of  money,  or  to  bring  more  real  capital  into  market. 

We  have  seen  that  dealers  in  Bank  bills,  and  in  domestic  exchan- 
ges, do  not  want  a  national  institution  ;  either  to  bring  all  these  bills  to  a 
specie  standard,  or  to  bring  the  exchanges  as  near  as  possible  to  a  level. 

We  have  seen  that  the  state  Banks  may  be  opposed  to  the  establish- 
ment of  a  National  Bank  of  discount  with  Branches  : — 

1st.  On  the  general  ground,  that  it  is  not  for  their  interest  to  have  such 
an  institution  coming  into  competition  with  them. 

2nd.  That  many  of  them  may  be  opposed  to  any  measure  restricting 
their  own  issues,  and  limiting  their  operations. 

3d.  That  some  of  them  may  have  the  expectation  of  being  themselves 
the  agents  of  government,  and  of  having  the  use  of  the  public  moneys,  so 
long  as  no  National  Bank  is  incorporated. 

4th.  That  some  of  them  may  be  actually  insolvent,  and  if  so,  they  may 
object  to  a  National  Bank,  because  its  operations  will  tend  to  lead  them 
to  a  more  speedy  liquidation  of  their  affairs. 

5th.  That  others  enjoying  a  reputation  for  superior  solidity,  may  be 
said  to  reap  a  harvest  from  the  want  of  confidence  under  which  more 
feeble  institutions  are  laboring. 

We  have  seen  that,  of  these  State  Banks,  the  officers,  directors,  stock- 
holders, and  many  of  the  customers  may  all  be  supposed  to  have  a  com- 
mon interest,  connected  with  that  of  their  respective  corporations,  in  op- 
posing the  establishment  of  a  National  Bank.  Many  of  them  having 
really  no  objection  to  such  an  institution,  provided  its  powers  be  restricted 
in  that  particular,  which  may  have  a  bearing  upon  their  respective  con- 
cerns ;  while  others,  secretly  opposed  to  such  an  establishment,  on  ac- 
count of  its  interference  with  their  speculations,  and  its  apprehended  di- 
munition  of  their  property  :  in  theory  at  last,  admit  the  necessity  of  a  Na- 
tional Bank  for  the  public  welfare  ;  and  content  themselves  with  throwing 
only  such  obstacles  in  the  way  as  may  preclude,  for  the  present,  the  pos- 
sibility of  its  going  into  effective  operation.* 

*  There  are  many  individuals' who  do  not  openly  oppose  the  establishment  of  a 
National  Banking  Institution,  but  their  influence  is  employed  to  defeat  every  mea- 
sure calculated  to  give  effect  to  its  operation.  They  are  advocates  for  such  an  act 


69 

In  all  this  examination,  there  has  not  appeared  a  single  objection,  either 
to  the  establishment  of  state  Banks,  properly  regulated,  or  to  that  of  a  Na- 
tional Bank,  properly  incorporated,  which  can  be  traced  to  the  interest  of 
the  people — that  is,  to  the  interest  of  the  mass  of  the  whole  nation  ;  nor 
does  the  examination  itself  suggest  the  possibility  of  such  an  objec- 
tion. On  the  contrary  the  laborer,  the  mechanic,  the  small  trader,  the 
artizan,  the  farmer,  the  manufacturer,  the  merchant,  all  of  small  capi- 
tal, and  the  whole  multitude  of  consumers,  have  a  direct  and  impera- 
tive interest  in  favor  of  State  Banks,  and  of  a  National  Bank,  and  of  a 
National  Bank  especially,  in  order  that  the  State  Banks  themselves 
may  be  regulated  and  sustained  ;  that  all  their  usefulness  may  be  preser- 
ved to  the  community,  while  the  evils  attending  any  abuse  of  their  powers 
are  properly  guarded  against. 

How  then  is  it,  that,  for  the  past  few  years,  a  certain  opposition  to  Banks 
generally,  and  to  a  National  Bank  in  particular,  is  supposed  to  have  been 
made  by  the  People  of  the  United  States  ?  The  people  of  a  country,  the 
circumstances  of  which  call  more  particularly  for  the  aid  of  these  institu- 
tions, and  to  the  circumstances  of  which  this  aid  is  more  peculiarly  adapt- 
ed than  it  is  to  those  of  any  other  country  ?  How  is  it  that  this  opposi- 
tion has  been  supposed  to  be  popular  ?  What  interest  have  the  laboring 
classes  in  this  opposition  ?  How  is  it  that  a  National  Bank,  and  that  even 
all  Banks,  have  been  decried,  by  those  who  profess  themselves  the  mouth- 
piece of  the  people  ?  How  is  this,  when  of  all  institutions,  Banks  are 
most  decidedly  of  a  democratic  character ;  and  of  all  Banks,  a  National 
Bank  has  more  claims  for  popularity  on  the  poor,  than  on  the  rich ;  upon 
the  industrious  and  enterprising  operative,  than  upon  the  large  capitalist, 
and  great  money  operator,  or  ambitious  speculator. 

To  explain  this  mystery,  for  such  it  is,  we  must  suppose  a  case,  by  way 
of  illustration. 

We  suppose  then  a  state  of  things,  in  which  there  are  three  or  four  hun- 
dred State  Banks  scattered  over  the  United  States,  we  suppose  at  the  same 
time  a  National  Bank  of  discount  and  deposit,  with  Branches  in  the 

of  incorporation  as  will  either  nullify  the  powers  of  the  proposed  Bank,  as  will  so 
strip  it  of  privileges,  as  to  prevent  the  subscription  to  the  stock  necessary  to  carry 
it  into  operation.  From  those  who  possess,  or  hope  to  possess,  the  use  of  the  pub- 
lic deposits,  and  the  advantages  of  the  government  circulation,  there  is  no  quarter 
to  be  expected.  They  object  even  to  the  establishment  of  a  Fiscal  Agent,  as  much  as 
they  do  to  a  sub-treasury  system.  Others,  having  no  expectations  of  this  kind,  ad- 
mit, as  a  matter  of  theory,  the  necessity  of  a  National  Bank,  provided  it  be  strictly 
a  Government  Bank  as  they  term  it,  confined  to  the  duty  of  receiving,  holding,  and 
paying  out  the  Government  moneys.  For  then  it  can  act  no  more  than  a  sub-treas- 
ury system  upon  the  paper  circulation  of  the  country.  Or,  they  will  not  object  to 
a  Government  Bank,  provided  it  be  not  allowed  to  discount  notes,  because  in  such 
cases  it  will  obtain  no  private  deposits,  and  will  issue  its  bills  only  in  payment  of 
government  debts  :  which  bills  it  must  soon  receive  back  again  in  payment  of  gov- 
ernment dues.  It  will  then  neither  come  into  competition  with  other  Banks,  nor 
interfere  with  their  circulation.  Some  are  willing  to  have  a  National  Bank  provi- 
ded its  capital  be  small,  because  with  a  small  capital  distributed  over  an  immense 
country  its  competition  with  other  institutions  must  be  feeble,  and  its  operation  on 
the  currency  of  little  importance.  Others  are  willing  to  have  a  Bank  provided  it 
has  no  power  to  establish  Branches  ;  because  they  trust  to  the  legislatures  of  their 
own  States,  to  exclude  those  branches  from  sections,  where,  perhaps,  they  are  most 
needed,  and  thus  exempt  their  own  Banks  from  the  required  action  of  such  an  insti- 
tion.  Others  would  limit  the  extent  of  dividends,  or  the  power  of  discounting,  or 
the  rate  to  be  charged  on  bills  of  exchange  ;  because  they  know  that  the  more  the 
Bank  is  hampered  in  this  respect,  the  less  probability  there  is  that  the  stock  will  be 
taken  up,  and  so  long  as  it  is  not,  they  will  be  able  to  keep  things  as  they  are. 


70 

several  states,  to  be  in  operation  ;  and  the  exchanges  between  the  most 
distant  points  of  the  country,  including  the  differences  in  the  value  of  the 
paper  of  these  several  Banks,  to  be  brought  so  nearly  to  an  equality,  that 
the  greatest  difference  may  not  exceed  one  per  cent. 

We  suppose  these  State  Banks  of  course  to  be  all  paying  specie  for 
their  bills  ;  and  the  National  Bank,  with  its  Branches,  so  operating  amongst 
them,  that  no  one  of  them  can  extend  its  issues  beyond  a  certain  limit, 
without  having  the  surplus  of  its  bills  brought  back  upon  it  with  a  demand 
for  specie. 

We  suppose  this  operation  of  the  National  Bank,  tending  as  it  must,  to 
keep  the  State  Banks  within  certain  limits,  to  prevent  them  from  lending 
their  money  so  freely  as  they  might  otherwise  do ;  and  consequently,  to 
cause  occasional  disappointments  to  their  directors,  and  inconvenience  to 
many  of  their  heavy  borrowers.  The  rigid  operation  of  such  an  institu- 
tion bearing  hard  on  some  individuals,  in  some  instances,  although 

"  It  is  a  wholesome  rigor  in  the  main-" 

Wherever  a  Branch  of  this  Bank  is  established,  we  may  suppose  it  to 
be  looked  upon  by  other  Banks  in  its  vicinity  with  no  very  favorable  eye. 
It  is  a  stranger,  a  sort  of  interloper,  but  worse  than  all,  a  regulator,  and 
who — 

"  'Ere  felt  the  halter  draw 
With  good  opinion  of  the  law  Tf 

Accordingly  in  such  places,  the  Bank  is  an  unpopular  institution  :  not 
with  the  people,  or  with  the  laboring  classes,  for  they  have  nothing  to  do 
with  it ;  but  with  those  immediately  connected  with  the  local  Banks,  re- 
stricted by  it  in  their  operations. 

Wherever  a  Branchmay  be  located, too,  as  the  Parent  Board  is  in  another 
city,  we  may  suppose  it  to  be  regarded  as  belonging  to  that  city,  rather 
than  to  the  place  in  which  it  operates,  thus  giving  occasion  to  some  local 
invidious  comparisons.  At  any  rate,  it  is  a  competitor,  and  were  it  out  of 
the  way,  other  Banks  in  the  place  would  have  more  deposits,  a  larger  share 
of  the  circulation,  and  do  a  better  business. 

The  Branch  too,  not  only  operates  upon  the  Bank  in  its  own  vicinity,  but 
these  Banks  being  again  thus  acted  upon,  operate  upon  other  Banks  through- 
out the  state,  and  throughout  the  surrounding  country.  Whatever  incon- 
venience therefore  may  be  suffered,  from  the  occasional  wholesome  and 
proper  check  received  by  some  of  these  Banks  in  their  disposition  to  ex- 
pand, the  odium  is  thrown  upon  the  National  Bank. 

We  may  suppose  one  of  these  Branches  to  be  located  in  a  large  and  pow- 
erful state,  in  which  there  may  be  perhaps  nearly  one  hundred  other 
Banks,  established  in  the  principal  towns  or  counties.  The  influence  of 
these  Banks  may  be  supposed  to  be  in  proportion  to  the  number  and  wealth 
of  their  directors,  stockholders,  and  customers  ;  and  to  have  a  powerful 
effect  in  carrying  any  of  the  elections  of  the  state. 

The  Branch  Bank  in  question  we  suppose  to  be  in  a  city,  on  the  sea- 
board, where  a  large  part  of  the  national  revenue  is  collected.  The  ave- 
rage amount  of  this  revenue  on  hand,  from  the  peculiar  circumstances  of 
the  time  being  immensely  large  ;  and  the  reasoning  being  very  natural, 
that  if  there  were  no  such  Branch  in  the  way,  the  advantage  of  the 
whole  of  these  public  deposits  would  be  enjoyed  by  some  of  the  state 
Banks.  We  may  suppose  some  of  these  state  Banks  to  have  special 


71 

reasons  for  expecting  this  peculiar  favor,  provided  the  existing  National 
Bank  could  be  divested  of  its  chartered  privileges.  In  this  event,  the 
efficient  conductors,  and  heavy  borrowers  of  these  institutions,  would 
come  in  for  an  increased  amount  of  accommodation. 

Reasons  of  this  kind  operating  together,  render  the  National  Bank 
throughout  the  country,  particularly  obnoxious  to  a  ceriain  class  of  very 
influential  persons  ;  and  this  especially,  in  the  city  and  state  alluded  to. 
This  class  of  persons  we  may  suppose,  to  belong  to  the  ruling  party  in 
political  matters  ;  and  to  have  the  advantage  of  possessing  in  a  peculiar 
manner  the  ear  of  the  people.  Of  course  their  electioneering  influence 
must  be  of  the  last  importance. 

Suppose  also,  at  this  time,  a  number  of  persons  to  be  resident  in  the 
capital  of  the  state  ;  whose  position  at  the  seat  of  government,  together 
with  their  high  standing  and  reputation  for  wealth,  renders  them  pe- 
culiarly powerful  with  the  executive  and  legislative  departments.  These  per- 
sons have  a  large  interest  in  banking  institutions,  and  their  past  success 
encourages  them  to  believe  that  they  may  further  advance  their  fortunes 
by  a  certain  monopoly  of  state  banking  power.  Accordingly,  scarcely  a 
charter  for  a  moneyed  institution  is  to  be  obtained  without  their  consent, 
while  the  control  they  have  over  numbers  of  state  institutions,  from  the 
influence  they  are  supposed  to  possess  at  the  seat  of  state  government, 
enables  them  to  perform  a  very  important  part  in  promoting  the  designs  of 
any  candidate  for  political  preferment.  The  interest  of  these  persons,  and 
of  their  friends,  in  local  Banks,  in  different  parts  of  the  state,  and  their  de- 
sire to  give  the  operations  of  their  institutions  free  scope,  begets  in  them 
a  sort  of  hostility  to  the  existence  of  a  National  Bank  ;  as  well  on  ac- 
count of  its  regulating  action  on  other  Banks,  as  on  account  of  its  enjoy- 
ing the  use  of  the  public  moneys,  which,  but  for  this  circumstance,  might 
be  elsewhere  distributed.  These  persons  have  accordingly  an  object  to 
accomplish,  in  return  for  which,  they  have  a  political  influence  to  give. 
The  same  views,  and  the  same  circumstances,  operating  in  a  similar  man- 
ner in  other  parts  of  the  country. 

We  now  suppose  in  this  state,  and  at  this  period,  an  individual  to  have 
made  his  appearance,  of  considerable  talent,  and  of  great  ambition.  He 
has  already  distinguished  himself  in  the  councils  of  the  state  of  which  he 
is  a  native.  He  is  a  Senator  :  but  he  aims  at  becoming  the  chief  magis- 
trate of  the  commonwealth,  and  subsequently  of  the  whole  union.  An 
honorable  ambition.  An  object,  perfectly  unexceptionable,  provided  the 
mode  of  its  attainment  be  equally  so.  This  person  has  also  his  purpose 
to  obtain  ;  and  his  influence  to  give  in  return,  for  the  services  he  may 
require. 

The  continued  operation  of  a  National  Bank,  and  even  the  enjoyment 
of  its  existing  chartered  rights,  depending,  from  a  coincidence  of  circum- 
stances in  a  great  measure  upon  the  course  pursued  by  this  distinguished 
individual,  in  respect  to  it. 

These  two  parties  may  be  supposed  to  meet.  The  object  of  one,  is 
the  attainment  of  wealth,  through  a  combination  of  banking  operations  ; 
that  of  the  other,  is  the  attainment  of  the  highest  honor  in  the  gift  of  the 
people.  The  purpose  of  one  party  is  to  remove  an  obstacle  to  the  un- 
limited action  of  its  banking  operations,  and  to  obtain  for  its  Banks  the 
use  of  a  portion  of  the  public  moneys.  The  purpose  of  the  other,  is  to 
make  use  of  the  local  banking  interests  and  influence,  to  secure  the  grati- 
fication of  ceriain  political  ambition.  In  other  words,  the  wish  of  the 


72 

first,  is  to  put  down  the  existing  United  States  Bank,  and  to  prevent  the 
incorporation  of  any  other  like  institution.  The  design  of  the  last,  is  to 
gain  possession  of  the  Presidental  chair,  by  making  electioneering  capital 
of  this  local  and  individual  opposition  to  a  National  Bank. 

When  two  such  interests  call  for  co-operation,  an  understanding  is  soon 
brought  about.  Accordingly  we  may  suppose  it  to  be  agreed,  on  the  part 
of  the  candidate  for  the  presidency,  that  every  effort  shall  be  made  to  de- 
prive the  existing  United  States  Bank,  as  far  as  possible,  of  its  privileges, 
and  to  oppose  the  continuance  of  such  a  corporation.  On  the  other  part, 
that  every  effort  shall  be  made  to  elevate  this  distinguished  individual  in 
public  office,  until  he  arrives  at  the  highly  honorable  position  to  which  he 
aspires. 

The  plan  is  a  feasible  one.  The  same  reasons,  making  the  removal  of 
the  National  Bank  desirable  with  the  State  Banks  of  one  section  of  the 
country,  making  it  equally  so  with  those  of  other  sections.  The  putting 
down  of  the  UNITED  STATES  BANK,  being  popular  with  certain  State  Banks. 
These  institutions,  through  their  most  active  conductors,  operate  upon  the 
mind  of  their  customers,  while  the  customers  severally  operate  upon  the 
minds  of  those  dependent  upon  them,  or  with  whom  they  have  more  or 
less  interchange  of  sentiment.  The  borrowers  of  local  Banks,  being  told 
that  they  cannot  obtain  all  they  ask  for,  on  account  of  the  operations  of 
the  National  Bank,  are  easily  led  to  look  upon  this  institution  as  the 
greatest  obstacle  to  their  prosperity.  They  regard  it  as  a  monster.  They 
describe  it  as  such,  to  those  around  them.  They  invoke  the  aid  of  their 
friends  and  acquaintance,  to  put  down  the  monster;  and  multitudes,  having 
themselves  nothing  to  do  with  Banks,  are  led  to  believe  from  these  rep- 
resentations, that  the  existing  National  Bank  is  indeed  something  of  a 
peculiarly  destructive  character  ;  and  that  any  other  institution  of  the  kind 
must  be  equally  so.  The  public  mind  is  thus  brought  into  a  state  of  in- 
flamability,  under  an  impression  of  the  existence  of  some  inconvenience 
of  which  the  people  in  fact  have  never  been  in  the  slightest  degree  sensi- 
ble. The  whole  spirit  of  hostility  originating  with  comparatively  a  small 
number  of  persons,  having  a  particular  pecuniary  interest  at  stake. 

A  point,  however,  is  gained.  A  watchword  is  created  ;  a  powerful 
party  is  wrought  upon  to  adopt  this  watchword  ;  and  the  people — the  la- 
boring classes — are  persuaded  that  their  interests  have  been  studied  in  the 
whole  matter.  The  downfall  of  a  National  Bank  now  becomes  popular  with 
two  very  different  classes  at  once.  With  certain  bank  directors  and  rich 
men,  because  the  institution  is  supposed  to  interfere  with  their  moneyed 
concerns  ;  and  with  a  portion  of  the  laboring  classes,  and  even  of  the 
poor,  because  this  measure  is  supposed  to  promote  the  success  of  the  po- 
litical party  to  which  they  are  attached.  The  people  having  been  per- 
suaded to  believe  this,  by  the  very  bank  directors  and  rich  men  who  have 
planned  the  whole  campaign  for  their  private  purposes. 

Opposition  to  a  National  Bank  being  now  the  measure  of  a  party,  there 
is  a  mutual  action  and  reaction  in  favor  of  it.  The  watchword  sustains  the 
party,  and  the  party  sustains  the  watchword ;  and  adopted,  as  it  is,  it  now 
becomes  the  railway  upon  which  the  Presidential  candidate  alluded  to,  is 
to  hazard  his  career. 

Some  difficulties,  however,  remain  to  be  removed.  There  is  still  a 
very  general  persuasion  in  the  public  mind,  that  without  a  National  Bank, 
the  bills  issued  by  the  several  State  Banks  will  be  so  rapidly  multiplied, 
as  unavoidably  to  be  followed  by  a  depreciation  of  their  value — that  the 


73  I 

issues  of  some  Banks  will  become  so  large  as  to  render  the  holi 
their  paper  unsafe  for  the  public,  and  in  case  of  their  insolvency,  tot 
an  undesirable  odium  upon  the  reputed  instruments  of  the  generl 
lamity. 

To  meet  this  difficulty,  a  friend  of  the  Governor's  (for  the  fortunate 
Senator  may  now  be  supposed  to  have  advanced  thus  far  in  his  projected 
career)  suggests  the  plan  of  obliging  each  of  the  Banks  of  the  State  to 
contribute  annually  a  certain  amount,  to  meet  the  defalcation  of  any  Bank 
becoming  insolvent.  Able,  sound,  and  well  conducted  institutions,  are 
thus  to  provide  for  the  deficiency  of  the  weak,  unsound,  or  badly  conduct- 
ed. Banks  best  deserving  of  credit,  promoting  the  circulation  of  the  bills 
of  institutions  least  deserving  of  confidence  ;  and  this,  too,  at  the  expense 
of  good  Banks,  which,  by  the  same  measure,  lose  the  benefit  of  so  much 
circulation  of  their  own.  The  injustice  of  the  principle  is  evident ;  but 
the  anxiety  of  some  persons  to  establish  new  Banks,  and  of  others,  con- 
ductors of  Banks,  whose  charters  are  about  to  expire,  to  retain  their  posi- 
tion, induces  them  to  accede  to  the  proposition.  In  truth,  there  is  no 
alternative.  The  measure  has  been  resolved  upon  in  conclave,  by  those 
without  whose  consent  neither  a  new  act  of  incorporation  can  be  obtained, 
nor  an  old  charter  renewed.  A  Safety  Fund  is  thus  proposed  to  be  introduced 
for  theoperation  of  a  National  Bank,  the  essential  difference  consistingin  this, 
that  whereas  the  tendency  of  a  National  Bank  is  to  restrict  the  operations 
of  other  Banks,  each,  to  its  proper  limit,  in  proportion  to  its  strength,  the 
tendency  of  the  Safety  Fund  is  to  uphold  and  extend  the  operations  of  the 
institutions  having  least  ability  and  credit  of  their  own.  The  superior 
ingenuity  of  the  contrivance,  however,  is  much  lauded  ;  and  it  is  even 
seriously  suggested,  that  if  all  the  Banks  throughout  the  United  States, 
would  thus  contribute  to  sustain  the  credit  of  institutions  unable  to  sustain 
themselves,  there  would  be  no  need  of  a  National  Bank  ! 

Meantime  the  distinguished  individual  already  alluded  to,  has  made 
another  step  in  the  career  of  political  advancement.  He  is  now,  we  are 
to  suppose,  Vice-President  of  ths  United  States.  The  sphere  of  his  in- 
fluence is  transferred  from  the  capital  of  his  own  State,  to  that  of  the 
whole  nation.  He  is  within  a  step  of  the  object  of  his  ambition,  but  the 
most  arduous  part  of  his  engagement  is  yet  to  be  performed  ;  and  his  suc- 
cess is  not  secure  without  obtaining  the  ear,  and  the  good  will,  of  the  ac- 
tual incumbent  of  the  Presidential  chair.  The  popularity  of  this  incum- 
bent, at  the  same  time,  being  so  great  as  almost  to  confer  upon  him,  in 
effect,  the  nomination  of  a  successor. 

Here  are  two  objects  to  be  attained.  The  Anti-National  Bank  party  is 
to  be  satisfied,  and  the  favor  of  the  ruling  Chief  Magistrate  is  to  be  gained. 
To  unite  these  two  objects,  however,  is  not  a  difficult  task  ;  part  of  the 
popularity  of  this  Chief  Magistrate,  amongst  the  advocates  for  the  unlim- 
ited freedom  of  State  Banks,  taking  its  rise  from  his  supposed  hostility  to 
this,  with  them,  very  unpopular  institution. 

The  President  we  may  suppose  to  be  a  man  far  advanced  in  age,  of 
strong  passions  and  prejudices,  and  of  more  military  than  financial  talent; 
one  who  has  never  been  convinced  of  the  necessity  of  a  National  Bank, 
or  of  the  advantage  of  a  well  balanced  Banking  System  — perhaps  having 
never  entered  into  a  practical  examination  of  the  subject.  Possibly  he 
may  have,  too,  some  old  grudge  against  the  conductors  of  the  existing 
Bank,  whose  political  views  he  believes  to  differ  from  his  own.  He  is 
fond  of  glory.  The  Bank  is  represented  as  a  monster.  The  destroying 

10 


74 

of  such  a  monster  is  set  before  him  as  a  Herculean  task — a  work,  the 
achievement  of  which  will  hand  his  name  down  to  posterity,  with  the 
same  kind  of  renown  as  that  gained  by  certain  heroes  of  antiquity,  so  re- 
markable for  ridding  the  earth  of  serpents,  dragons  and  hydras. 

The  jealousy  of  the  aged  chieftain,  perhaps,  too,  may  have  been  roused 
by  an  artful  suggestion  of  the  inquiry  — which  is  the  greatest  man,  the 
Head  of  the  Nation,  or  the  Head  of  the  National  Bank?  He  is  made  to 
believe  that  he  ought  to  have  the  nomination  of  the  principal  officers  of 
the  Branches — that  his  influence  over  the  institution  shouldbe  such  as  not 
to  permit  of  a  separation  of  the  purse  and  the  sword  ;  and  his  wishes  be- 
ing thwarted  in  this  respect,  in  one  or  two  instances,  he  is  persuaded  that 
the  disappointment  arises  altogether  from  the  personal  hostility  of  the  en- 
emies of  his  glory.  He  is  thus,  as  it  were,  by  an  almost  magical  and  un- 
seen hand,  led  to  vow  eternal  hatred  to  the  Bank  ;  as  the  child  of  the 
Carthagenian  was  led  by  its  parent  to  swear  eternal  enmity  to  the  Ro- 
mans. 

The  charier  of  the  Bank  is  about  to  expire.  An  act  renewing  this 
charter  passes  both  Houses  of  Congress  ;  but  it  receives  the  President's 
veto.  He  has  Constitutional  scruples  against  the  incorporation  of  a  Na- 
tional Bank,  at  the  same  time  he  has  a  plan  in  his  pocket  for  making  one 
after  his  own  heart  —  a  plan  of  which  we  may  suppose  it  to  be  known  at 
least,  that  it  never  could  be  passed  by  an  American  Legislature.  This 
opposition  of  the  President,  sustained  as  it  may  be,  by  the  influence  of 
certain  State  Banks,  and  of  those  whose  private  interests  are  opposed  to 
any  National  Bank — forbids  the  expectation  that  the  institution  actually 
in  operation,  will  be  allowed  a  new  term  of  existence,  or  that  any  other  of 
the  kind  will  be  permitted  to  go  into  operation. 

But  this  is  not  enough  ;  the  institution  still  performs  its  most  useful  and 
important  functions — that  of  restricting  and  regulating  the  issues  of  other 
Banks.  The  conductors  of  some  of  these  Banks,  finding  this  operation 
more  and  more  an  obstacle  to  the  accomplishment  of  their  enterprizes,  are 
impatient  of  the  restraint  ;  the  managers  of  others  are  equally  impatient, 
for  a  division  of  the  use,  and  perhaps  of  the  abuse,  of  the  large  amount  of 
public  money,  known  to  be  in  possession,  on  deposit,  or  so  coming  into 
possession,  of  the  United  States  Bank.  Perhaps  at  this  juncture,  the  en- 
joyment of  such  an  advantage  is  the  greatest  crime  of  which  the  Bank  is 
considered  culpable  ;  at  any  rate,  by  divesting  it  of  this  privilege,  two 
purposes  are  accomplished.  Its  salutary  operation  on  other  Banks  is 
crippled,  and  the  spoils  are  divided  among  the  victors.  We  may  suppose, 
accordingly,  representations  to  be  made  to  the  head  of  the  nation,  that  the 
removal  of  the  public  deposits  from  the  National  Bank  to  certain  other 
Banks,  however  unjust  it  may  be  admitted  to  be,  will  be  a  popular  measure. 
We  may  suppose,  for  example,  a  letter  to  be  written  signed  by  some 
twelve  or  fourteen  bank  directors  of  one  or  two  of  the  principal  seaports, 
expressing  this  opinion,  and  purporting  itself  to  be  the  voice  of  the  people, 
as  if  the  people  had  had  any  thing  to  do,  either  with  the  letter,  or  with  the 
views  of  its  signers.  , 

The  idea  of  popularity  thus  suggested,  and  the  reputed  splendor  of 
glorification  attending  the  destruction  of  a  monster,  induced  the  veteran 
chief  to  take  upon  himself  the  responsibility  of  carrying  out  the  views  of 
those  who  thus  make  him  the  instrument  of  their  purposes. 

His  first  step,  however,  is  to  accomplish  his  designs  legitimately.  The 
public  treasure  is  believed  to  be,  as  he  represents  it,  unsafe  in  the  Na- 


75 

tional  Bank.  A  friend  of  his  own  is  appointed  by  the  Treasury  Depart- 
ment, to  examine  into  the  affairs  of  the  Bank.  Contrary  to  expectation, 
he  reports  his  conviction  of  the  soundness  of  the  institution,  and  of  the 
perfect  safety  of  the  government  funds.  A  committee  of  investigation  is 
appointed  by  Congress  ;  the  result  is  the  same.  The  public  moneys  are 
pronounced  to  be  safe,  and  the  removal  of  them  on  the  score  of  security 
is  necessarily  relinquished.  The  Secretary  of  the  Treasury  is  applied 
to.  He  demurs  at  sanctioning  a  proceeding  so  much  in  derogation  of  his 
duty  as  a  public  officer.  The  Cabinet  are  consulted.  The  Cabinet  can- 
not be  brought  into  the  President's  views,  and  all  the  heads  of  depart- 
ments having  come  in  as  a  unit,  are  obliged  to  go  out  as  a  unit.  A  new- 
Secretary  of  the  Treasury  being  appointed,  he  also  is  called  upon  to  re- 
move the  public  moneys  from  the  place  of  deposit  assigned  by  law — and 
he,  too,  gives  his  reasons  for  refusing  compliance  with  a  requisition,  as 
uncalled  for  by  the  circumstances,  and  as  unjust  towards  the  institution, 
as  it  is  inconsistent  with  a  faithful  performance  of  his  public  duties.  He 
is  obliged,  of  course,  to  resign.  Another  Secretary  is  appointed,  and  this 
time,  we  may  presume,  with  the  express  understanding  that  he  is  to  per- 
form the  act  required,  right  or  wrong.  He  becomes,  then,  the  tool  of 
arbitrary  power,  and  is  rewarded,  perhaps,  for  his  subserviency,  and  gross 
violation  of  every  principle  of  equity,  by  an  appointment  to  the  highest 
seat  in  the  judiciary  of  the  nation — a  seat  designed  only  for  those  most 
distinguished  for  independence  of  spirit,  and  for  a  scrupulous  adherence 
to  the  dictates  of  justice. 

The  government  moneys  we  may  now  suppose  to  be  removed  to  certain 
State  Banks,  replenishing  the  pockets  and  favoring  the  speculations  of  the 
knowing  ones,  who  have,  as  it  were  by  the  aid  of  a  magician's  power,  or 
a  Harlequin's  wand,  effected  this  important  transposition. 

Here  is  an  admitted  abuse  of  power,  to  be  sheltered  only  from  the  in- 
dignation of  the  people,  by  taking  refuge  in  the  unpopularity  of  the  party 
wronged,  and  by  summoning  to  the  aid  of  the  wrong-doer  the  private  in- 
terests benefited  by  this  most  egregious  breach  of  public  faith.  The 
minds  of  the  people,  therefore,  especially  of  the  laboring  classes,  are  to  be 
prejudiced  not  only  against  the  Bank,  but  against  any  National  Bank.  A 
certain  act  of  wrong  is  required  to  be  done  by  those  in  power,  as  a  con- 
dition of  being  sustained  themselves  ;  and  a  clamor  is  raised  amongst  the 
people  by  these  wrong-doers,  against  the  injured  party,  in  order  that  the 
people  may  not  examine  into  the  character  and  causes  of  the  acts. 

The  people  might  inquire,  why  the  public  treasure  was  removed  from 
the  place  of  safety  appointed  by  the  law  ;  and  if  they  did  inquire,  they 
would  find  that  it  was  not  because  their  interests  were  consulted.  They 
might  inquire,  for  whose  benefit  it  was  that  these  moneys  were  removed 
to  other  Banks  ;  and  if  they  did  inquire,  they  would  not  find  that  it  was 
for  the  benefit  of  the  people,  or  of  the  laboring  classes  ;  or  even  for  the 
benefit  of  any  very  large  number  of  citizens.  They  would  find  the  whole 
advantage  gained,  to  be  divided  amongst  a  few  of  their  most  wealthy  fel- 
low citizens.  They  would  not  find  that  this  removal  of  the  deposits  was 
to  benefit  the  poor;  it  could  only  benefit  the  rich. 

The  people  might  ask,  too,  why  the  United  States  Bank  was  thus  dealt 
with,  or  why  any  National  Bank  met  with  so  much  opposition,  and  they 
would  find  that  no  reason  could  be  furnished,  with  which  they  had  any 
concern.  They  might  inquire  amongst  themselves,  which  of  them  could 
trace  any  loss  or  inconvenience  to  the  operations  of  a  National  Bank — 


76 

and  they  would  not  find  that  they  had  either  individually,  or  collectively, 
any  cause  of  complaint.  On  the  contrary,  they  would  h'nd  that  so  far  as 
their  interests  were  concerned,  they  were  essentially  benefited  by  the  in- 
stitution. In  a  pecuniary  point  of  view,  by  the  sound  paper  currency  se- 
cured to  them  through  the  restraining  power  of  a  National  Bank  upon 
other  Banks — and  in  a  political  point  of  view,  by  the  security  it  afforded 
to  their  liberties — restraining  the  Executive  arm  of  government,  by  its 
separation  of  the  power  of  the  purse  from  that  of  the  sword. 

The  people  would  find  the  only  grounds  of  complaint  to  be  those  con- 
nected with  the  immediate  interests  of  comparatively  a  few  Banks,  and  of 
comparatively  a  very  small  number  of  individuals  ;  individuals,  too,  whose 
circumstances  were  not  such  as  to  call  for  the  aid  or  sympathy  of  the 
nation. 

To  prevent  the  people  from  making  these  inquiries,  and  these  discove- 
ries, a  HUE  AND  CRY  is  industriously  raised  against  a  National  Bank,  as  if 
the  people  had  been  already  convinced  that  such  an  institution  was  not 
even  entitled  to  the  protection  of  the  laws. 

But  why,  it  may  be  asked,  has  there  been  &  popular  objection,  as  some 
have  represented,  throughout  the  country,  not  only  against  a  National 
Bank,  but  against  all  Banks  ?  Why  have  the  conductors  of  all  Banks 
been  stigmatized  by  professed  organs  of  the  people's  voice,  as  Bank  Bar- 
ons, and  the  bills  of  all  such  institutions,  as  Bank  rags? 

Since  the  establishment  of  a  well-regulated  Banking  System  is  so  emi- 
nently beneficial  to  the  people,  and  to  the  working  classes,  how  is  it  they 
have  been  led  to  believe  it  to  be  for  the  interest  of  the  rich  to  sustain  the 
Banks,  and  for  the  interest  of  the  poor  to  abolish  them  :  and  hence,  to 
consider  any  effort  in  favor  of  Banks,  (State  or  National,)  as  a  contest  of 
the  rich  against  the  poor  ?  How  is  it  that  the  people,  or  any  of  them, 
especially  of  the  laboring  classes,  have  been  led  to  denounce  the  whole 
credit  system,  when  it  is  especially  the  poor,  and  not  the  rich,  who  need 
credit,  and  when  credit  is  most  beneficial  to  the  working  classes,  the  in- 
dustrious, and  the  enterprising  ? 

To  understand  this  matter,  we  must  suppose  our  case  a  little  further. 

We  suppose,  then,  the  object  of  the  State  Bank  party,  as  before 
hinted  at,  to  be  attained. — The  United  States  Bank,  with  its  Branches,  is 
demolished. — Its  doom  is  sealed,  and  a  guarantee  is  given  that  no  other 
is  to  appear  in  its  place.  It  is  even  prematurely  deprived  of  its  peculiar 
powers.  The  goverment  deposits  are  removed,  and  it  is  no  longer  an 
agent  for  receiving  and  paying  the  public  moneys.  Its  conductors,  and 
its  shareholders,  or  those  who  manage  for  them,  finding  no  hope  to  remain 
of  its  resuscitation,  procure  its  conversion  into  a  STATE  INSTITUTION.  It 
ceases  to  operate  either  in  regulating  the  issues  of  other  Banks,  or  in 
equalizing  the  currency.  In  fine,  it  becomes  itself  one  of  these  very 
State  Banks,  which  need  so  much  a  National  Regulator. — With  this  dif- 
ference, that  its  enormous  capital,  and  the  unusual  license  of  its  State 
charter,  make  it  now  not  only  a  MONSTER,  but  an  unchained  monster, 
amongst  the  other  moneyed  institutions  of  the  country. 

The  State  Banks,  released  from  their  former  restraint,  freely  issue  their 
bills.  They  accommodate  each  other,  and  each  accommodates  its  partic- 
ular circle  of  borrowers.  Loans  are  made  with  the  greatest  facility,  al- 
though not  always  with  the  greatest  equality  or  prudence.  Some  custom- 
ers being  much  more  favored  than  others.  Money  appears  to  be  abundant ; 


77 

and  in  proportion  to  its  abundance,  the  demand  for  it  increases  ; — prices 
rise,  and  high  prices  require  more  means  ;  for  if  prices  be  doubled,  it  re- 
quires twice  the  amount  of  capital  to  purchase  the  same  quantity  of  mer- 
chandize, or  of  produce.  High  prices,  too,  foster  the  spirit  of  speculation, 
for  the  mere  circumstance,  that  they  have  risen,  generates  the  belief  that 
they  will  still  rise.  Meantime,  all  who  have  influence  with  the  Banks, 
use  this  influence  to  the  utmost.  Every  director  of  a  bank  is  treated  with 
liberality  by  his  colleagues,  because  each  of  these  colleagues  expects  to 
require  the  same  liberality  in  his  turn. 

But  this  is  not  equally  the  case  with  all  Banks,  nor  in  all  parts  of  the 
United  States.  In  the  old  states  there  is  more  real  capital  already  accumu- 
lated ;  it  is  more  equally  distributed,  and  there  is  comparatively  less  oppor- 
tunity for  using  it  to  advantage.  Along  the  Atlantic  border,  therefore,  the 
Banks,  especially  to  the  north  and  east,  expand  less  than  they  do  in  the 
new  states.  Towards  the  south  and  west,  capital  seems  to  promise 
greater  profit ;  there,  too,  there  are  more  of  the  adventurous  and  enterpri- 
sing, who  need  capital ;  and  there,  accordingly,  the  Banks  are  more  ur- 
gently called  upon  ;  while  different  interests  combine  in  prompting  them 
to  yield  more  freely  to  the  applications  they  receive.  Where  there  is 
less  real  capital,  also,  in  proportion  to  the  call  for  it,  there  is  the  greater 
tendency  to  the  creation  of  something  fictitious,  to  answer  the  same  pur- 
pose, if  it  be  only  for  a  time. 

In  proportion  to  the  increasing  issues  of  the  Banks,  their  paper  money 
depreciates.  If  this  were  uniformly  the  case,  the  change  would  hardly 
be  noticed  ; — prices  would  be  said  to  rise  ;  when,  in  fact,  it  is  only  that 
which  represents  value,  which  has  depreciated.  The  Banks,  however, 
being  more  liberal  in  some  portions  of  the  country  than  in  others,  we  see 
that  one  paper  dollar  in  one  state,  will  not  do  so  much  as  another  paper 
dollar  will  do  in  another  state  ;  and  we  then  begin  to  detect  the  deprecia- 
tion in  the  value  of  the  Bank  bill.  Some  Banks  having  issued  more  bills, 
in  proportion  to  the  real  capital  represented,  than  they  should  have  done, 
the  consequence  is,  that  each  of  these  bills  represents  less  real  capital  than 
it  professes  to  represent.  And  the  Banks  in  some  states  or  sections  of  the 
country,  having  been  led  to  pursue  this  course  more  than  they  have  in 
others,  the  consequence  of  this,  also,  is  that  the  paper  currency  of  some 
sections  of  the  country,  differ  in  value  from  that  of  other  sections, — a 
dollar  bill  of  the  Banks  of  one  state,  being  really  worth  one  hundred 
cents,  in  hard  money ;  while  that  of  the  Banks  in  another  state,  may 
really  be  worth  only  ninety  cents,  hard  money.  Hence,  if  the  govern- 
ment collect  the  public  revenue,  or  the  payment  of  the  public  lands,  in 
the  paper  currency  of  some  states,  it  must  lose  the  difference  arising 
from  the  depreciation  of  this  currency,  when  it  pays  its  own  debts  in 
other  states.  Besides,  as  there  is  no  legal  tender  of  payment  except  gold 
or  silver,  even  the  United  States  government  cannot  oblige  any  one,  in 
any  of  the  states,  to  receive  payment  for  services,  or  claims,  in  anything 
but  gold  or  silver.  While,  then,  it  might  collect  its  dues  in  the  deprecia- 
ted Bank  paper  of  a  certain  state,  it  would  be  under  the  necessity  of  pay- 
ing even  members  of  Congress  from  that  state,  as  well  as  other  public 
functionaries,  in  hard  money.  Not  only  this  ;  if  the  citizens  of  some 
states  may  pay  their  duties,  or  pay  for  their  lands,  in  the  depreciated  paper 
currency  of  their  section  of  the  country,  while  the  citizens  of  others  are 
paying  the  same  dues  in  bank  paper,  equal  to  specie,  the  public  burdens 


78 

are  not  equally  distributed.  The  requisition  of  the  Constitution  that  duties 
and  taxes  shall  be  equal  in  all  the  states,  will  not  be  complied  with. 

What  is  to  be  done  ?  This  derangement,  and  this  difficulty,  evidently 
arises  from  the  want  of  a  NATIONAL  BANK.  It  will  not  do  to  confess  the 
error ;  still  less  will  it  do  to  disappoint  the  expectations  of  those  to  whom 
the  pledge  is  supposed  to  have  been  given,  that  no  National  Bank  shall  be 
allowed  to  exist.  The  only  course  to  be  pursued  to  save  the  treasury,  and 
to  equalize  the  public  burdens,  is  to  require  the  payment  of  all  duties  and 
purchases  of  lands,  in  hard  money. 

Here,  again,  is  another  difficulty.  When  the  hard  money  is  received, 
how  is  it  to  be  kept  distinct  and  seperate  from  the  paper  money  with  which 
it  is  surrounded  ?  The  silver  and  gold  of  the  nation  cannot  be  deposited 
in  the  Banks,  for  then  the  depreciated  paper  of  the  Banks  might  be  paid 
out  in  return  for  it ;  and  if  Banks  cannot  be  trusted  to  pay  their  own  bills 
in  specie,  how  can  they  be  trusted  with  returning  the  government  specie 
for  specie,  when  called  upon  ?  Or  how  can  they  be  expected  to  pay  the 
checks  of  the  government  in  silver  and  gold,  when  they  cannot  pay  their 
own  debts  in  any  thing  but  depreciated  paper. 

In  those  parts  of  the  country  where  the  bills  of  the  Banks  have  not 
depreciated,  these  questions  may  not  be  agitated ;  but  if  the  funds  of  the 
government  are  deposited  in  the  Banks  of  some  of  the  states,  and  not  in 
those  of  other  States,  here  is  a  new  cause  of  complaint,  and  a  new  ground 
for  sectional  jealousy.  On  the  other  hand,  if  the  silver  and  gold  of  gov- 
ernment be  left  in  Banks,  which  pay  out  only  their  own  depreciated  pa- 
per, then  these  Banks  enjoy  an  advantage  of  which  other  Banks  are  de- 
prived, for  they  may  buy  up  their  own  bills,  at  a  discount,  with  the  very- 
specie  funds  which  the  government  has  extorted  from  citizens  to  deposit 
with  them. 

With  the  hard  money  system,  then,  what  may  be  called  a  sub-treasury 
system,  must  be  introduced.  Government  moneys,  and  government  re- 
ceipts and  payments,  must  be  separated  ;  must  be  preserved  from  the 
contamination  incident  to  mingling  with  the  currency  of  the  nation.  The 
public  dues  must  be  collected  in  gold  and  silver  in  all  the  states,  and  when 
collected  they  must  be  kept  in  vaults  and  safes,  also  in  gold  and  silver, 
till  they  are  paid  out  in  coin. 

Here  is  a  change  of  system  evidently  to  be  attended  with  great  pecu- 
niary loss,  and  inconvenience  to  the  country.  The  withdrawal  of  gov- 
ernment funds  from  all  banks  is  a  withdrawal  of  so  many  millions  of  real 
capital  from  daily  use  ;  and  the  receipts  and  payments  of  government 
being  altogether  in  gold  and  silver,  there  is  here  further  withdrawal  of 
so  many  millions  of  real  capital  to  be  derived  from  this  circulation,  which 
might  be  also  in  daily  use,  if  these  receipts  arid  payments  were  made  in 
Bank  paper;  leaving  the  gold  and  silver  to  be  employed  for  the  purposes 
of  trade.  That  such  a  measure  should  be  unpopular  with  all  of  the 
Banks,  and  with  all  connected  with  them,  was  to  be  anticipated.  That 
it  should  be  so,  especially  with  those  Banks,  or  their  conductors,  who  had 
been  encouraged  to  look  upon  the  public  deposits,  and  the  government 
agency,  as  part  of  the  spoils  of  victory,  for  which  they  had  labored,  and 
to  which  they  were  entitled,  is  not  to  be  wondered  at.  How,  then,  is 
such  a  course  to  be  justified,  defended,  palliated  ?  How  are  those  who 
adopt  it,  to  be  shielded  from  the  odium  to  which  they  must  be  inevitably 
exposed  1  Especially,  how  is  this  to  be  done  without  a  confession  of 
past  errors  ? 


79 

The  same  step  must  be  again  taken  as  on  the  former  occasion.  The 
party  aggrieved,  must  be  misrepresented  in  the  public  eye.  Popular  pre- 
judices must  be  excited  against  all  Banks  ;  all  advocates  of  Banks  must 
be  denounced  ;  and  all  Bank  bills  must  be  spoken  of  as  "  rags,"  mere 
rags.  All  efforts  to  obtain  a  wholesome  Banking  System  must  be  again 
represented  as  a  contest  of  the  rich  against  the  poor.  It  is  thus  attempted 
to  give  a  certain  lone  to  public  opinion,  to  silence  the  voice  of  common 
sense.  A  tone  which  popular  opinion,  of  itself,  never  could  adopt ;  for 
perhaps  no  course  could  be  pursued  more  calculated  to  make  the  rich, 
richer,  and  the  poor,  poorer,  than  that  which  we  have  supposed  to  have 
been  so  pertinaciously  pursued,  by  those  directing  the  efforts  mad, — first, 
to  the  destruction  of  the  National  Bank  ;  and  afterwards,  to  that  of  all 
Banks. 

The  case  we  have  imagined,  is  a  difficult  one  indeed,  for  the  sagacious 
manager,  who,  with  a  skill  worthy  of  a  better  cause,  may  be  supposed  to 
have  been  pulling  the  wires  of  all  this  machinery.  He  has  done  his 
part,  the  monster  is  destroyed,  the  public  deposits  have  been  removed. 
Certain  State  Banks  have  enjoyed  a  monopoly  of  the  government  agency, 
at  least  for  a  time ;  certain  political  friends  have  had  the  use  of  govern- 
ment moneys  :  and  He  too  has  received  his  reward.  By  the  aid  of  those 
who,  from  their  connection  with  these  state  Banks,  were  led  to  yield  him 
their  best  services,  his  highest  ambition  has  been  gratified.  But  he  is  still 
pledged  to  maintain  the  course  he  has  pursued  ;  that  is,  he  is  pledged, 
come  what  will,  to  prevent  the  re-existence  of  a  National  Bank. 

The  position  however,  in  which  he  is  placed,  obliges  him  to  use  his 
power  against  the  friends  to  whom  he  owes  his  elevation.  There  is  no 
other  alternative.  A  National  Bank  on  the  one  hand,  or  a  hard  currency 
and  sub-treasury  system  on  the  other.  The  last  operates  indeed  more  se- 
verely on  the  state  Banks,  than  a  National  Bank  could  have  done.  But  he 
must  go  forward.  The  same  legal  advisers  formerly  engaged  in  drawing  up 
special  pleas  to  justify  a  breach  of  public  faith  towards  the  late  national 
institution,  if  they  are  now  keepers  of  his  conscience,  may  as  dexterous- 
ly show  him  how  his  own  plighted  faith  to  his  state  Bank  friends  may 
be  preserved,  while  he  is  aiming  a  most  fatal  blow  at  their  prosperity.  They 
may  show  him,  how  a  pledge  to  destroy  the  adversary  of  his  friend,  does 
not  prevent  him  from  destroying  the  friend  also.  His  scruples  are  over- 
come. "  He  kicks  the  ladder  down  by  which  he  had  ascended," — hoists 
the  sub-treasury  standard,  and  joins  in  the  popular  cry  of  his  own  crea- 
tion :  Down  with  the  Banks. 

When  the  government  deposits  were  removed,  as  we  have  supposed, 
from  the  National  Bank  to  other  Banks ;  and  when  these  other  Banks 
were  made,  the  agents  of  government  for  paying  and  receiving,  there  was 
a  withdrawal  of  so  many  millions  of  dollars  from  one  channel  of  circu- 
lation to  be  directed  into  other  channels  ;  producing  distress  in  one  case  ; 
and  superabundance,  for  the  most  part  untimely,  in  another.  This  may  be 
supposed  to  have  operated  of  course  unfavorably,  and  hardly,  upon  the 
customers  of  the  National  Bank,  and  those  dependent  upon  them,  yet  af. 
least  it  may  have  been  a  subject  of  rejoicing  with  the  customers  of  the 
other  Banks.  But  when  the  hard  money,  and  sub-treasury  system  is  adopt- 
ed, there  is  a  withdrawal  of  so  many  millions,  deposit  and  circulation, 
from  active  employment  altogether.  No  Bank  has  the  deposits,  and  no 
Bank  gives  out  its  bills  in  lieu  of  specie,  in  payment  of  public  debts,  conse- 
quently, there  is  here  an  entire  diminution  of  the  capital  in  trade,  which 


80 

does  good  to  no  one.  No  one  has  cause  of  rejoicing  at  it,  while  the  spasm 
which  this  contraction  occasions,  is  a  cause  of  suffering  to  all. 

Not  only  this,  when  a  specie  circular  is  issued  by  government,  requiring 
all  its  dues  to  be  paid  in  hard  money,  the  parties  having  to  pay,  resort  im- 
mediately to  the  Banks  for  the  specie  required.  The  Banks  have  re- 
course to  their  customers,  and  the  customer  of  the  Bank  falls  back  upon 
all  who  are  in  debt  to  him.  The  Banks,  perhaps,  apprehending  more 
than  they  have  occasion  to  fear,  and  not  knowing  who  will  pay,  and  who 
may  disappoint  them,  call  for  three  or  four  times  the  amount  absolutely 
necessary,  the  borrowers  of  the  Bank  are  equally  alarmed,  and  press  in 
proportion  upon  all  indebted  to  them.  As  the  pressure  increases,  disap- 
pointments, and  complaints,  and  excuses  are  multiplied,  and  in  proportion 
to  these,  confidence  and  credit  diminishes.  A  panic  ensues,  and  with  the 
appearance  of  panic,  all  confidence  disappears. 

In  the  condition  of  unlimited  extension  in  which  we  have  supposed  the 
Banks  all  over  the  country  to  have  placed  themselves,  in  consequence  of 
their  freedom  from  restraint ;  and  with  the  increase  of  their  numbers 
which  may  have  doubled  during  the  period  in  contemplation,  it  is  easy  to 
imagine  the  sudden,  and  almost  universal  insolvency  into  which  the  whole 
community  must  be  plunged  by  such  a  panic,  such  loss  of  confidence,  and 
such  general  embarrassments.  A  state  of  distress  follows,  in  which  all 
may  be  supposed  to  be  convinced  of  the  error  in  the  administration  of 
public  affairs,  by  which  this  distress  has  been  brought  about.  To  meet 
the  case,  public  opinion,  or  rather  the  opinions  of  a  portion  of  the  public, 
must  be  wrought  upon  :  and  it  is  for  this  end,  that  this  pretended  voice  of 
the  people  is  raised,  and  still  continued  against  what  are  called  Bank  rags, 
and  Bank  barons. 

We  have  supposed  the  preceding  circumstances,  in  order  to  account 
for  the  manner  in  which  a  prejudice  has  been  created  in  the  minds  of 
some,  both  against  a  National  Bank,  and  against  all  Banks.  This  preju- 
dice is  called  an  objection  of  the  people.  Let  the  people  judge  whether  it 
is  their  objection  or  not.  Let  the  people  judge  for  themselves,  how  near- 
ly the  circumstances  detailed,  resemble  those  which  have  actually  taken 
place  in  this  country  within  a  year.  And  let  the  laboring  classes  espe- 
cially enquire,  what  they  have  gained,  either  by  the  hard  money  currency, 
or  by  the  sub-treasury  system  :  and  what  objection  they  can  now  have, 
either  to  a  National  Bank,  or  to  a  well  regulated  system  of  state  Banks, 
checked  and  balanced  by  a  National  Bank. 


SECTION  VI. 

Objections  arising  from  the  management  of  the  late  United  States  Bank. 
Stock  speculation — Fluctuations  in  trade — Expansion  and  reaction. 

The  partial  distress  occasioned  by  the  sudden  rise  and  fall  of  the 
stock  of  this  Bank,  soon  after  its  first  going  into  operation,  in  what  has 
been  called  "  the  Baltimore  Speculation,"  is  alleged  in  proof  of  the  abuse 
to  which  the  powers  of  a  National  Bank  must  always  be  liable. 

By  the  act  of  incorporation,  the  directors  possessed  the  power  of  lend- 
ing the  money  of  the  Bank  upon  the  securities  of  its  own  stock.  A  few 
individuals  taking  advantage  of  this  circumstance,  engaged  in.  a  specu- 


81 

lation  of  buying  up  the  shares,  by  borrowing  of  the  Bank  itself,  to  the  ex- 
tent of  their  purchases.  The  higher  the  price  quoted  in  the  market,  the 
more  money  the  Bank  lent  upon  the  stock  ;  and  the  more  money  the 
Bank  was  known  to  lend  upon  this  security,  the  higher  the  price  rose.  If 
the  Bank  lent  the  par  value,  purchasers  were  willing  to  give  more  than 
par.  If  the  Bank  lent  twenty-five  per  cent,  more  than  par,  purchasers 
would  give  still  more.  Every  one  calculating,  that  by  paying  the  small 
difference  between  what  the  Bank  lent,  and  the  price  of  the  shares,  he 
should  make  a  profit  on  the  whole  amount  of  his  purchase.  If  the  stock 
rose  five  per  cent.,  a  thousand  dollars  in  this  way  might  procure  him  the 
advantage  of  this  five  per  cent,  upon  ten  thousand,  being  a  profit  of  five 
hundred  dollars,  upon  the  one  thousand  cash  investment.  The  speculation 
was  commenced  and  carried  on  chiefly  by  some  of  the  directors  of  the  prin- 
cipal Branches,  the  Bank  lending  perhaps  one  hundred  and  twenty-five  or 
one  hundred  and  thirty  upon  its  own  slock,  not  really  worth  at  the  time, 
one  hundred.  If  the  Bank,  however,  lent  so  much,  other  persons  would 
lend  still  more.  Some,  because  they  really  thought  the  securities  good, 
and  others,  because  they  wished  to  produce  a  certain  effect  upon  the  mar- 
ket. Private  lenders,  however,  generally  required  some  individual  secu- 
rity besides  the  stock,  to  guard  against  a  fall ;  but  the  Bank  lent  or  may 
have  been  made  to  lend  to  some  of  its  own  directors  on  the  security  of 
the  stock  alone.  The  price  of  the  shares  rose  to  one  hundred  and  fifty 
or  one  hundred  and  sixty.  A  few  knowing  ones,  who  sold  out  in  time, 
made  a  profit,  but  at  length  the  bubble  burst.  The  Bank  in  some  cases 
was  left  in  the  lurch,  and  sustained  a  heavy  loss,  and  numbers  of 
speculators,  or  rather  stock-jobbers,  with  those  who  hadunwearily  placed 
confidence  in  them,  were  ruined.  All  this  however  resulted  from  an 
abuse  of  power,  of  which  the  directors  of  any  banking  institution,  with 
the  same  privileges,  might  have  been  guilty.  Similar  mismanagement  hav- 
ing indeed  occurred  in  state  institutions,  as  in  the  conspiracy  cases  in  the 
city  of  New  York,  some  years  since.  The  difference  being  only  this, 
that  as  the  capital  of  the  Bank  was  very  large,  these  speculations  were 
large,  and  the  disasterous  result  in  the  same  proportion.  The  whole,  how- 
ever, of  this  misconduct,  with  its  consequences,  might  have  been  provi- 
ded against,  by  a  clause  in  the  act  of  incorporation,  now  common  in  the 
charters  of  our  state  Banks,  prohibiting  the  institution  from  lending  upon 
the  security  of  its  own  stock;  at  least  from  lending  beyond  a  certain  pro- 
portion of  its  par  value. 

In  the  getting  up  of  moneyed  institutions,  there  are  always  certain  per- 
sons, who  take  shares,  and  seek  to  become  directors,  for  no  other  purpose 
than  that  of  speculating  upon  the  rise  of  the  stock.  These  knowing  ones 
subscribe — talk  much  of  the  immense  advantages  of  the  institution — pro- 
cure the  insertion  of  newspaper  paragraphs,  to  the  same  etTect ;  and  hav- 
ing created  an  imaginary  value,  sell  out,  resign,  and  care  no  more  about 
the  matter,  except  to  pocket  their  differences.  This  perhaps  they  have  a 
right  to  do,  but  the  institution  itself  should  not  be  made  to  become  a  party 
to  their  operations  ;  and  to  provide  against  this,  must  be  the  care  of  legis- 
lators, in  drafting  the  statute  by  which  the  Bank  is  incorporated. 


The  fluctuations  in  trade,  during  the  twenty  years  term  of  the  Bank, 
have  also,  by  some,  been  charged  to  the  management  of  its  conductors. 
Very  few  however,  urge  this  objection  seriously. 

11 


82 

There  are  certain  fluctuations  in  trade,  and  in  the  money  market,  neces- 
sarily arising,  as  it  is  easy  to  perceive  from  the  nature  of  things. 

The  manufacturer  having  sold  his  years'  stock  of  goods  to  advantage, 
is  encouraged  next  year,  to  manufacture  a  greater  quantity.  His  neighbor 
does  the  same,  for  he  has  done  equally  well.  The  two  have  no  under- 
standing together,  as  to  the  increase  about  to  be  made  by  each.  Mem- 
bers of  any  and  every  branch  of  trade  may  combine  to  restrict  each  other 
as  to  price  ;  but  they  never  restrict  each  other  as  to  the  quantity  to  be 
produced.  The  farmer  may  bind  himself  not  to  sell  his  wheat  for  less 
than  he  did  the  previous  year :  but  he  will  not  agree  that  his  land  shall 
not  yield  more  wheat  next  year  than  it  did  the  last.  What  is  true  of  these 
persons,  is  equally  true  of  all  others.  All  having  done  well  one  year,  are 
encouraged  to  manufacture  or  produce  more  next  year,  consequently  this 
next  year,  there  may  be  more  goods  than  are  wanted,  and  it  is  a  losing  year. 
All  are  now  discouraged,  and  all  again  restrict  their  operations.  And  as 
manufacturers  restrict  their  operations,  the  raw  material,  brought  forward 
to  meet  their  expected  wants,  proves  to  be  too  abundant.  Thence  fol- 
lows a  losing  season  for  producers.  So  it  is  with  communities,  or  nations. 
Three,  four,  or  five  years  of  good  business,  lead  to  a  too  rapid  increase 
of  engagements,  on  one  hand,  and  of  production  on  the  other.  The  sup- 
ply exceeds  the  demand,  or  the  ability  to  remunerate,  and  then  follows  a 
period  of  embarrassment.  Such  changes  we  find  have  occurred  in  this 
country  every  five,  six,  or  seven  years.  When  they  do  occur,  corres- 
ponding fluctuations  take  place  in  the  money  market.  The  pressure  for 
money,  however,  or  the  want  of  this  pressure,  is  the  effect,  and  not  the 
cause  of  these  fluctuations  in  trade.  The  operations  of  a  National  Bank 
are  no  more  chargeable  with  these  changes,  than  the  rise  and  fall  of  the 
mercury  in  the  thermometer  are  chargeable  with  the  changes  of  the  wea- 
ther. These  fluctuations  would  have  taken  place  had  there  been  no  United 
Stales  Bank  in  existence ;  and  the  probability  is,  that  the  action  and  reaction 
would  have  been  much  greater,  if,  during  the  same  period,  the  state  Banks 
had  not  been  checked  in  their  issues,  and  in  their  disposition  to  expand, 
by  the  regular  and  inflexible  action  of  a  National  Bank. 

When  the  charter  of  the  late  United  States  Bank  was  about  expiring, 
and  the  conductors  of  the  institution  were  anxious  to  obtain  a  renewal  of 
its  privileges,  they  may  well  be  supposed  to  have  pursued  a  course  calcu- 
lated to  render  the  corporation  popular  with  the  commercial  public.  They 
could  not  do  otherwise.  At  such  a  time,  it  was  to  be  expected  that  they 
would  make  their  greatest  efforts  to  accommodate  all  applying  to  them  for 
aid,  in  order  to  furnish  as  little  ground  of  complaint  as  possible.  But, 
with  all  this  disposition  on  the  part  of  officers,  and  directors,  the  Bank 
could  not  go  beyond  its  proper  limits.  It  was  obliged  to  retain  a  certain 
amount  of  specie  in  its  vaults  ;  and  was  obliged  to  hold  itself  prepared  for 
any  demand  made  upon  it.  And  this  especially,  with  the  knowledge  that 
there  were  not  wanting,  those  who  were  ready  to  put  its  strength  to  the 
test  whenever  an  opportunity  presented  itself.  Probably  to  the  borrowers 
of  the  Bank,  its  liberality  did  not  appear  equal  to  their  wants.  Others, 
however,  opposed  to  the  institution,  complain  that  it  did  at  this  time 
enlarge  its  issues  beyond  measure  ;  and  that  it  lent  one  year,  some  mil- 
ilions  more  than  it  had  ever  done  before.  This  being  put  forth  as  an  ob- 
jection :  the  power  of  such  a  corporation,  enabling  it,  they  say,  to  make 


83 

money  scarce,  or  plenty,  according  as  it  may  be  expedient  to  influence  the 
public  mind  for  political  or  party  purposes. 

In  reply  to  this  objection,  let  us  bear  in  mind  that  the  proper  business 
of  a  Bank  being  that  of  lending  money,  it  is  the  direct,  and  imperative  duty 
of  its  conductors,  to  keep  every  dollar  of  its  available  means  employed, 
drawing  interest  as  far  as  possible.  The  Bank  ought  to  lend  always  as 
much  as  it  can  lend,  and  it  can  at  no  time  do  more.  It  would  be  absurd 
to  suppose,  that  such  an  institution  would  keep  several  millions  of  dollars 
idle  for  a  certain  period,  in  order  to  make  money  scarce :  and  it  is  equal- 
ly absurd  to  suppose  that  having  lent  to  the  extent  of  its  ability,  it  could 
go  still  further  in  order  to  make  money  plenty. 

Accordingly,  if  there  were  any  time,  when  the  directors  of  the  late 
National  Bank  lent  more  than  they  did  at  another,  it  was  not  because  their 
disposition  to  lend  was  greater  ;  but  because  more  was  called  for.  If 
they  lent  less  than  their  means,  it  was  because  less  was  called  for :  the 
opportunities  for  using  money  advantageously, not  being  so  great  or  so  nu- 
merous. It  is  to  be  remembered,  too,  that  money  is  not  always  most 
plenty,  when  the  Banks  lend  most.  More  money  may  then  be  called  for, 
and  obtained,  from  the  Banks,  because  the  prospects  of  profit  are  more 
encouraging.  In  such  times,  directors  and  others,  who  have  most  influ- 
ence with  their  respective  institutions,  borrow  all  they  can.  Those  who 
do  not  occupy  the  same  favorable  position  will  not  be  able  to  borrow  so 
easily.  The  discount  line  of  the  Banks  may  then  be  larger  than  usual, 
while  money  with  a  certain  class  of  borrowers,  is  much  scarcer;  and  the 
rate  of  interest  in  the  market  much  higher.  So  when  a  Bank  lends  less, 
it  may  be  because  privileged  persons  care  less  about  borrowing.  Others 
who  have  no  particular  influence  with  the  institution,  then  borrow  more 
easily  ;  and  money  is  said  to  be  plenty,  although  the  discount  line  of  the 
Bank  may  be  less  than  usual. 

Whatever  the  disposition  of  the  conductors  of  the  late  National  Bank 
might  have  been  they  could  not  scatter  its  money  amongst  the  voters  at 
the  polls,  or  amongst  the  people  individually.  Neither  could  they  so 
order  the  circumstances  of  any,  as  to  make  them  desirous  of  borrowing. 
The  several  Branches  could  only  lend  to  those  who  asked  ;  and  those  who 
asked,  were  only  those  who  thought  they  could  employ  the  money  advan- 
tageously ;  and  those  who  thought  this,  were  led  to  it,  at  the  period  in 
question,  by  the  peculiarly  prosperous  appearance  of  the  times;  prompting 
every  one,  as  it  did,  to  think  that  what  was  purchased  one  month,  could 
certainly  be  sold  the  next  at  a  profit. 

Whatever  the  expansion  of  the  United  Sates  Bank  may  have  been  at 
this  time,  however,  it  was  no  more  than  in  proportion  to  that  of  all  the 
state  Banks.  If  the  Bank  lent  twenty  millions  more  than  it  had  done  at 
any  previous  time,  this  twenty  millions  was  to  be  divided  amongst  twenty- 
six  different  states  ;  and  was  after  all  equal  only  to  about  four  or  five  per 
cent,  of  the  whole  amount  loaned  by  all  the  Banks  together.  The  great 
rise  in  prices  at  this  peiiod,  could  not  therefore  have  been  caused  by  the 
increased  loans  of  the  United  States  Bank  ;  for  this  would  not  have  justi- 
fied a  rise  of  more  than  about  five  per  cent.  Neither  could  this  expansion 
have  caused  the  expansion  of  all  the  other  Banks ;  on  the  contrary,  it  is 
certain  that  the  amount  of  state  Bank  loans  would  have  been  much  more 
increased  than  it  was,  if  there  had  been  no  National  Bank  in  operation  : 
the  operation  of  the  United  States  Bank  on  the  other  Banks,  in  the  na- 
ture of  the  case,  unavoidably  tending  to  check  the  spirit  of  speculation. 


84 

In  confirmation  of  this,  we  find  that  no  sooner  was  this  national  institu- 
tion taken  out  of  the  way,  than  the  State  Banks  generally  multiplied  their 
loans,  and  were  themselves  multiplied  in  number,  till  the  increase  in  the 
amount  of  Bank  loans  instead  of  twenty  millions,  was  upwards  of  two 
hundred  millions  of  dollars.  The  Banks  in  the  meantime  having  nearly 
doubled  in  number.* 

What  then  were  the  circumstances  leading  the  United  States  Bank,  as 
well  as  the  state  Banks,  to  augment  its  loans,  about  the  time  of  its  apply- 
ing for  the  renewal  of  its  charter  ?  What  led  the  customers  of  the  Bank 
to  call  for  an  increased  amount  of  discounts  ?  As  the  expansion  of  the 
Bank  was  not  the  cause,  but  the  effect  of  a  spirit  of  speculation,  from 
which  the  call  for  this  expansion  originated,  what  were  the  circumstances 
giving  birth  to  this  spirit ;  and  by  which  it  was  particularly  fostered  at 
this  period  ? 

We  have  already  noticed,  that  there  always  have  been,  and  will  be  fluc- 
tuations in  the  demand  for  money,  as  in  the  demand  for  goods  ;  proceed- 
ing from  what  may.  be  called  ordinary  or  natural  causes.  But  there  are 
also  at  times,  extraordinary  or  artificial  causes,  combining  with  the  ordinary, 
increasing  the  demand  for  money,  and  so  increasing  the  discounts  of  the 
Banks. 

For  some  years  previous  to  the  period  under  consideration,  the  circum- 
stances of  the  country  had  been  unusually  prosperous.  The  currency 
was  well  regulated  ;  the  domestic  exchanges  were  almost  upon  a  level ; 
the  moneyed  institutions  of  all  the  states,  bore  a  character  of  almost  un- 
questioned stability;  and  private  credit  was  rarely  impeached.  The 
profits  of  capital  had  been  liberal  and  regular  ;  the  inducements  to  borrow 
from  the  Banks,  not  from  want,  but  from  the  prospect  of  pecuniary  advan- 
tage, were  sufficient  to  occasion  a  gradual  increase  of  the  demand  for 
loans.  Bank  facilities  were  desirable  ;  Bank  capital  was  reasonably 
profitable  ;  and  its  safety  beyond  suspicion.  The  public  treasury  was 
overflowing  ;  and  although  there  was  a  considerable  amount  of  the  Na- 
tional Debt  unpaid,  there  were  abundant  means  not  only  to  pay  the  inter- 
est, but  a  great  part  of  the  principal.  It  was  at  the  same  time  regarded 
by  the  capitalist  as  an  eligible  investment  of  his  money,  and  the  prospect 
of  its  being  speedily  paid  off,  was,  with  the  holders,  rather  a  subject  of 
regret. 

About  this  time,  the  destruction  of  the  power  of  the  United  States 
Bank,  to  which  we  have  before  alluded,  was  determined  upon,  by  certain 
parties  having  a  peculiar  interest  in  accomplishing  this  most  injudicious 

*  By  a  report  of  the  Secretary  of  the  Treasury,  of  3d  of  March,  1841,  it  appears 
that  between  the  years,  1834  and  1836,  while  the  United  States  Bank  was  closing  its 
concerns,  more  than  two  hundred  new  state  Banks  went  into  operation.  During  ihe 
same  period,  the  augmentation  of  the  Joans  of  all  the  state  Banks  together,  was 
equal  to  two  hundred  millions  of  dollars ;  or  about  one  hundred  percent,  on  the 
whole  amount  of  loans  and  discounts  of  1830,  when  a  National  Bank  was  in  full 
operation. 

In  1830,  including  the  issues  of  the  United  States  Bank,  the  amount  of  circulation 
was  forty  millions  more  than  the  specie  in  the  Bank  vaults.  In  1837,  without  the 
United  States  Bank,  the  circulation  was  one  hundred  and  four  millions  more  than 
the  specie  in  the  vaults. 

In  1830,  the  amount  of  bills  out,  and  deposits  in  all  the  banks,  was  less  than  one 
hundred  and  sixteen  millions.  In  1837,  the  amounts  of  bills  out,  and  deposits  was 
something  more  than  two  hundred  and  seventy-six  millions;  no  National  Bank 
being  then  in  operation.  This  estimate  too  being  exclusive  of  banks  and  institutions 
with  banking  privileges,  which  at  that  time  had  not  reported  to  the  Treasury  De- 
partment. 


85 

measure.*  Amongst  other  difficulties  in  the  way  of  the  project,  was  the 
circumstance  that  the  Bank  performed  for  government,  the  functions  of  a 
Loan  Office  ;  paying  the  interest  of  the  public  debt,  at  such  points  as  were 
required,  free  of  expense  ; — this  being  one  of  the  conditions  upon  which 
it  was  entitled  to  the  use  of  the  public  moneys. 

The  immediate  paying  off  of  the  public  debt  would,  therefore,  accom- 
plish two  purposes.  It  would  suddenly  deprive  the  Bank  of  a  large  por- 
tion of  the  government  deposits,  and  thus  diminish  its  ability  to  act  as  a 
check  upon  the  local  Banks  ;  and  it  would  meet  the  argument  in  favor  of 
sustaining  the  institution,  and  continuing  its  privileges,  derived  from  its 
performance  of  these  Loan  Office  duties. 

To  accomplish  this  object,  the  chief  magistrate  of  the  nation  was  to  be 
persuaded,  that  this  measure,  also,  would  particularly  redound  to  his  per- 
sonal glory. 

Whether  the  funds  to  meet  the  amount  of  the  debt  had  accumulated, 
or  not,  under  a  previous  administration  ;  or  whether  this  accumulation 
were  the  result,  or  riot,  of  past  years  of  national  prosperity,  was  a  matter 
of  indifference  ;  the  glorification  was  to  consist  in  the  fact  that  the  whole 
remainder  of  the  national  debt  was  paid  during  the  term  of  the  then  ruling 
president. 

The  argument,  of  course,  was  sufficient,  and  the  step  was  determined 
upon.  The  knowing  ones  were  apprized  of  the  purposes  of  the  adminis- 
tration. All  the  national  stocks  then  below  par  were  bought  up ;  and  the 
government  soon  afier  paid  off  the  whole  at  the  highest  possible  rate. 
Stocks  paying  an  interest  only  of  three  per  cent,  per  annum,  and  selling 
at  eighty  or  eighty-five  per  cent,  being  paid  off  at  the  full  rate  of  one  hun- 
dred. The  opposers  of  the  Bank  gained  their  point  ;  rich  men  became 
richer  ;  the  President  was  glorified,  and  the  people  paid  the  expense. 

But  this  was  not  all.  The  contemplated  paying  off  of  this  amount, 
having  been  made  known,  speculators,  or  those  who  had  the  disposition  to 
speculate,  naturally  made  the  calculation,  that  here  was  a  large  amount  of 
capital  about  being  withdrawn  from  the  public  funds,  which  those  to  whom 
it  belonged  must  be  anxious  to  invest  in  something  else.  Hence,  there 
would  be  an  increased  demand  for  all  objects  of  investment,  affording  a 
chance  of  profit.  Real  estate  must  rise,  local  stocks  must  rise,  property 
all  over  the  country  must  rise,  and  public  lands  must  rise.  The  idea  once 
current,  all  who  had  money  or  credit,  employed  their  means  to  the  utmost 
in  purchasing  lots,  lands,  and  stocks.  The  national  debt  was  paid  off, 
but  the  speculations,  made  in  anticipation  of  the  effect  of  this  payment, 
probably  exceeded  ten  times  the  amount.  Large  sums  were  deposited  in 
different  state  Banks,  which  thus  unusually  supplied,  lent  out  the  amount 
received,  with  more  than  ordinary  freedom.  Purchases  were  eagerly 
made,  and  prices  continued  to  rise  ; — the  first  speculators  made  money, 
and  consequently  went  on  to  make  new  purchases.  Others,  encouraged 
by  their  success,  followed  in  the  same  career.  As  prices  rose,  more 
money  was  called  for  ;  as  it  now  required  more  capital  to  purchase  the 
same  quantity  of  any  kind  of  property.  This  caused  a  demand  upon  the 
Banks  for  all  that  they  could  spare,  and  produced  a  proportional  demand 
upon  the  United  States  Bank ;  which,  especially  at  this  crisis,  could  not 


*  The  measure  was  particularly  injudicious  because  it  had  the  effect  of  diverting 

•  much  real  sound  capital  (35  millions,)  from  its  regular  and  wholesome  channels 

*  circulation,  either  to  be  withdrawn  altogether  from  the  country,  or  to  be  directed 
to  unwonted  channels,  tending  to  hazardous  and  precarious  investments. 


86 

be  more  backward  than  others  in  supplying  the  calls  of  all  applicants,  to 
the  extent  of  its  ability.  Thus  originated  the  much  talked  of  expansion  of 
this  institution,  which  was  said  to  be  for  party  effect,  when,  in  fact,  it  was 
but  the  effect  of  the  impulse  given  to  the  spirit  of  speculation,  by  the 
sudden  payment  of  the  whole  of  the  national  debt,  in  the  manner,  and  for 
the  reasons  represented. 

Meantime,  the  ball  having  been  set  in  motion,  continued  to  roll.  Spec- 
ulation still  went  on,  credit  being  yet  unimpaired  ;  prices  continued  to  rise, 
and,  consequently,  more  money  was  called  for.  Here,  then,  a  check  was 
perceived.  Not  from  a  change  in  the  disposition  of  the  conductors  of  any 
of  the  Banks,  but  from  the  nature  of  the  case.  The  state  Banks,  as  well 
as  the  National  Bank,  had  all  gone  to  the  extent  of  their  means  in  real 
capital;  and  while  the  national  institution  continued  in  operation,  they 
could  not  create  fictitious  capital  to  supply  the  demand  for  real.  A  partial 
reaction  took  place,  and  the  national  Bank  was  charged  with  calling  in 
this  year,  instead  of  letting  out,  as  it  had  done  the  year  before  ;  whereas 
the  disposition  of  the  officers  and  directors  of  the  Bank,  arid  especially 
of  its  several  branches,  could  not  have  changed  : — the  reaction  arising 
only  from  the  nature  of  circumstances,  over  which  they  could  have  no 
control ;  and  the  whole  amount  called  in  by  the  Bank,  being  but  a  trifling 
per  centage  upon  the  aggregate  amount  of  Bank  loans  throughout  the 
country. 

What  was  to  be  done  ?  More  capital  was  wanted,  and  the  foreign 
stockholders  of  the  United  States  Bank,  being  about,  as  was  supposed,  to 
withdraw  their  capital  from  the  country,  so  many  more  new  Banks  must 
be  incorporated  to  supply  the  deficiency  ;  and  as  almost  every  new  Bank 
seemed  to  suppose  itself  called  upon  to  supply  the  place  of  the  late  Na- 
tional Bank,  they  must  each  have  adequate  means.  Banking  institutions 
are  accordingly  incorporated,  with  capitals,  not  merely  of  one  to  five  mil- 
lions of  dollars,  but  with  liberty  to  increase  to  fifty  millions  ;  as  if  to  as- 
sure the  people  that  they  should  find  no  deficiency  of  Banking  capital  in 
consequence  of  the  destruction  of  the  national  institution,  then  just  com- 
pelled to  close  its  concerns.  To  supply  the  new  Banks  with  means,  fic- 
titious capital  was  created  : — the  capital  stocks  being  paid  in,  or  secured 
to  be  paid,  by  the  hypothecation  of  bonds  and  mortgages,  state  stocks, 
and  the  stocks  of  other  corporations.  Available  means  being  wanted, 
agents  were  employed  to  take  these  securities  to  Europe,  and  borrow  as 
much  as  possible  upon  them.  Money  was  thus  obtained.  All  the  Banks 
enjoyed  for  a  season,  an  equal  degree  of  credit,  and  their  bills  were  issued 
in  abundance  ;  the  management  of  some  of  them,  however,  being  much 
more  judicious  and  circumspect  than  that  of  others.  Meantime,  the  late 
United  States  Bank  becomes  metamorphosed  to  a  state  institution  ;  having 
its  old  capital,  with  a  new  charter,  and  new  privileges.  Its  course  differ- 
ing from  the  other  new  Banks  only  in  this,  that  having  thirty-five  millions 
of  real  capital  in  possession,  it  exchanged  this  real  capital  for  fictitious, 
apparently  with  as  little  loss  of  time  as  possible. 

There  is  now,  however,  no  national  check  or  regulator.  The  Banks 
are  multiplied,  and  their  issues,  in  various  forms,  increased.  Wild  lands 
are  bought  up  in  all  parts  of  the  country,  and  railroads,  turnpikes,  and 
canals,  are  projected  and  commenced,  to  give  a  reputation  of  value  to 
these  lands  ;  and  the  Banks  lend  their  bills,  bonds,  and  credit,  on  the  se- 
curity of  these  railroad,  canal,  and  turnpike  stocks;  some  of  the  directors 
being  themselves,  perhaps,  speculators  in  these  almost  newly  discovered 


87 

territories.  The  greater  the  amount  of  loans  made  in  this  way,  the  liigher 
the  supposed  value  of  this  kind  of  property  ;  and  the  greater,  of  course, 
the  supposed  responsibility  of  those  who  possess  it.  Their  credit  with  the 
Banks,  and  the  liberality  of  their  Banks  in  lending  them,  are  unbounded. 
As  fictitious  capital,  however,  abounds,  real  capital  disappears  ;  and  gold 
and  silver  seem  to  be  taking  refuge  in  other  countries.  To  stop  the  emi- 
gration of  one,  at  least,  of  the  precious  metals,  the  administrators  of  gov- 
ernment raise  the  price  of  gold  by  law.  But  the  law  cannot  regulate  the 
comparative  quantities  of  gold  and  silver  in  market,  any  more  than  it  can 
the  comparative  quantities  of  butter  and  cheese.  As  silver  and  gold  dis- 
appear, the  Banks  are  charged  with  circulating  too  many  small  bills.  Ef- 
forts are  made  to  prevent  the  issuing  of  Bank  bills  under  five  dollars,  and 
Banks  are  even  encouraged  to  expect  the  favor  of  government,  on  condi- 
tion that  they  issue  no  bills  less  than  ten  dollars.  This  only  increases  the 
evil,  for  in  proportion  as  the  small  bills  are  redeemed  by  the  banks,  so 
much  real  capital  is  taken  out  of  active  employment.  A  specie  circular  with- 
a  demand  for  hard  money,  not  from  a  national  Bank,  but  from  the  national 
government,  at  length  makes  its  appearance.  All  parties  are  roused  to  a 
sense  of  their  condition  ;  professed  insolvency  spreads  over  the  country  ; 
the  Banks  suspend  specie  payments,  and  a  general  explosion  takes  place. 
In  all  this  action  and  reaction,  the  late  United  States  Bank  had  no  con- 
cern, except  that  of  the  experience  afforded  by  these  circumstances,  and 
by  its  own  past  history,  showing  that  if  such  a  National  Institution  had 
continued  to  exist,  with  its  accustomed  operations,  these  transactions  would 
not,  and  could  not,  have  occurred. 

This  will  appear  still  more  strongly,  in  noticing  the  direct  effect  of  the 
removal  of  the  government  deposits  from  the  place  assigned  for  their 
keeping  by  law,  to  the  possession  of  certain  State  Institutions,  and  from 
these  to  others. 

In  the  irrigation  of  cultivated  fields,  water  distributed  in  judicious  and 
moderate  quantities  to  different  portions  of  the  soil,  affords  due  nourish- 
ment to  the  plants  and  assists  their  growth  ;  but  if  thrown  too  abund- 
antly into  particular  portions  of  land,  it  overwhelms,  deluges  and  destroys 
all  around  it.  So  State  Banks,  when  judiciously  supplied  with  pecuniary 
means,  act  the  part  of  irrigating  channels,  in  furnishing  capital,  as  it  is 
wanted,  in  their  respective  vicinities.  If  these  Banks  be  suddenly  pro- 
vided with  an  unusual  addition  to  their  means — more  than  their  customers 
are  able  to  employ  to  advantage,  and  more  than  is  required  by  the  position 
in  which  the  institutions  are  placed— this  over  whelming  surplus  is  pushed 
out  wherever  it  can  be  located,  wanted  or  not  wanted,  into  extraordinary 
employment.  The  Bank  lends,  for  fear  its  money  should  remain  unem- 
ployed, without  due  regard  to  security  ;  and  those  who  borrow,  engage  in 
unaccustomed  enterprizes,  merely  because  they  can  do  it  with  so  much 
facility  — a  ground  of  enterprize  usually  leading  to  a  disastrous  result. 

As  was  to  be  expected,  the  enormous  amount  of  government  funds  on 
hand  at  the  time  of  their  removal  from  the  National  Bank,  was  deposited, 
or  was  being  deposited,  with  those  State  Banks  of  which  the  conductors 
and  customers  were  supposed  to  be  most  favorable  to  the  existing  admin- 
istration of  government.  It  was  reasonable  to  suppose  that  under  such 
circumstances,  these  funds  would  be  distributed  in  loans  without  sufficient 
regard  to  security,  and  too  much  with  the  view  of  gaining  friends  for  the 
political  party  then  in  power. 


88 

Whether  this  apprehension  were  well  founded  or  not,  the  jealousy  by 
which  it  may  have  been  dictated,  was  a  legitimate  element  of  republican- 
ism. It  being  the  very  essence  of  republicanism  to  oppose  especially  the 
augmentation  of  Executive  power.  Accordingly,  this  position  of  the  pub- 
lic moneys  gave  rise  to  the  passage  of  what  is  usually  called  the  distribu- 
tion act,  as  the  only  means  of  providing  against  the  evil  apprehended.  A 
remedy  the  more  sure,  inasmuch  as  there  were  collateral  reasons  in  favor 
of  the  adoption  of  the  measure,  operating  with  members  of  the  legislature 
of  all  parties.  By  this  act,  these  funds  of  the  National  Government  were 
divided  amongst  the  several  Stales ;  the  consequence  of  which  arrangement 
was,  that  the  amounts  in,  or  coming  into,  the  several  Banks,  favored  by 
the  National  Government,  must,  at  the  time  appointed,  be  again  removed 
into  other  Banks,  patronized  by  the  different  State  Administrations. 

The  measure  was  deemed  hostile  to  the  partizans  of  the  National  ru- 
lers, and  it  therefore  seemed  desirable  with  them  to  render  it  as  obnoxious 
as  possible  :  throwing  the  odium  of  every  inconvenience  arising  from  its 
operation,  upon  those  from  whom  it  originated.  The  State  Banks  them- 
selves, or  most  of  them,  knowing  the  uncertain  tenure  by  which  they  held 
these  funds,  would  have  lent  them  out  cautiously  ;  but  they  were  directed 
and  urged,  as  it  is  said, by  the  organs  of  government,  to  lend  these  moneys 
liberally,  and  to  give  to  their  friends  all  possible  accommodation.  This 
undesirable  supply  of  capital  was  thus  hastily  pushed  into  positions  where 
it  was  not  wanted,  leading  those  who  were  prevailed  upon  to  borrow  itt 
into  a  snare,  and  eventually  overwhelming  and  suffocating  the  unhappy 
borrower,  with  the  very  abundance  of  means  with  which  he  had  been  so- 
gratuitously  deluged.  Here,  then,  was  an  aggravating  cause  fomenting, 
in  the  first  instance,  the  spirit  of  speculation,  and  augmenting  the  bitterness 
of  the  retribution  with  which  it  was  speedily  followed. 


SECTION  VII. 
The  United  States  Bank  of  Pennsylvania. 

The  extraordinary  result  of  the  affairs  of  the  United  States  Bank  of 
Pennslyvania,  the  conductors  of  which  proposed  to  make  it  a  substitute  for 
a  National  Bank,  has  been  represented  as  indicative  of  the  unsound  con- 
dition, and  mismanagement,  of  the  late  United  States  Bank,  previously 
under  the  direction  of  the  same  conductors  :  warranting  the  objection,  as 
it  is  urged,  that  the  powers  of  any  National  Bank  must  be  subject  at  all 
times  to  similar  abuse. 

To  judge  of  the  weight  of  this  objection,  we  must  see  in  what  the  two 
institutions  are  alike,  and  in  what  they  differ. 

The  Pennsylvania  Bank  resembles  the  late  National  Bank,  in  having 
the  name  and  style  of  The  United  States  Bank — with  the  difference,  that 
its  proper  style  is  the  United  States  Bank  of  Pennsylvania.  A  difference 
by  many  not  sufficiently  noticed  ;  and  consequently,  by  many,  these  two 
different,  and  entirely  distinct,  institutions,  have  been  regarded  as  one  and 
the  same. 

The  Pennsylvania  Bank  resembles  also  the  late  National  Bank,  a» 
having  been  presided  over  by  the  person  previously  President  of  the 
late  United  States  Bank.  It  had  also  several  of  the  same  directors,  offi- 
cers, tellers  and  clerks.  It  had  the  same  capital,  and  nearly  the  same 


89 

shareholders — except  that  the  proportion  of  the  late  National  Bank  be- 
longing to  the  Nation,  was  sold  by  the  Government  to  this  Pennsylvania 
Institution. 

As  to  the  name  or  style,  it  is  evidently  a  matter  of  little  importance.  A 
Bank  might  assume  the  style  of  the  BANK  OF  THE  WORLD  ;  and  yet  every 
one  would  know  that  it  was  no  more  the  Bank  of  the  whole  world,  than 
any  other  Bank.  There  is  a  Bank  in  New  York  called  the  City  Bank, 
but  every  one  knows  that  it  is  no  more  the  Bank  of  the  City,  than  any 
other  Bank  in  Wall  street.  There  is  another  styled  the  State  Bank,  and 
another  the  Bank  of  America  ;  but  the  first  is  no  more  supposed  to  be  the 
Bank  of  the  State,  than  the  other  is  the  Bank  of  the  whole  American  con- 
tinent. There  are  other  Banks  in  different  States,  styled  The  National 
Bank;  but  it  is  very  well  known,  that  not  one  of  them  is  a  Bank  of  the 
Nation,  or  such  a  National  Bank  as  the  circumstances  of  the  country  re- 
quire. So  it  should  be  borne  in  mind,  that  the  United  States  Bank  of 
Pennsylvania,  is  no  more  a  Bank  of  the  United  States,  in  consequence  of 
its  name,  than  the  North  American  Trust  and  Banking  Company,  of  New 
York,  is  an  institution  of  this  northern  continent,  including  the  British 
Provinces. 

So  far  as  the  names  of  Banks  are  adopted  merely  for  the  purpose  of 
distinction,  no  exception  can  be  taken.  If  adopted  to  impose  upon  the 
understanding  of  the  ignorant,  in  this,  or  in  any  other  country,  the  practice 
belongs  to  a  class  of  frauds  too  contemptible  to  be  noticed.  In  either 
case,  the  giving  of  the  name  of  the  United  States  Bank,  to  the  Pennsyl- 
vanian  institution,  is  no  reason  whatever  for  identifying  it  with  the  late 
United  States  Bank,  properly  so  called. 

The  same  individual  who  had  been  president  of  the  United  States  Bank, 
became  president  of  the  United  States  Bank  of  Pennsylvania  ;  but  he  had 
nothing  in  himself  enabling  him  to  carry  the  National  character  of  the  old 
corporation,  into  the  new  one.  He  resigned  his  place  in  one  institution, 
in  order  to  be  appointed  to  a  similar  place  in  another.  He  shifted  his 
command,  but,  unlike  the  Hero  of  the  Lakes,  he  could  not  carry  his  flag 
with  him.  He  was  obliged  to  sail  under  different  colors.  He  merely 
acted  the  part  of  a  private  citizen,  having  his  own  interest  in  view.  As 
an  officer  of  the  old  Bank,  wiih  a  liberal  salary,  and  occupying  a  highly 
respectable  position,  it  was  desirable  for  him  that  this  institution  should  be 
continued  in  existence.  Finding  this  to  be  impracticable,  his  next  effort 
was  to  procure  a  charter  from  his  own  State  for  a  new  Bank,  with  the  same 
amount  of  capital,  and  to  prevail  upon  the  stockholders  of  the  old  Bank,  to 
transfer  their  funds  from  the  National  to  the  State  Institution.  Possessing 
the  confidence  of  these  stockholders,  he  accordingly  procured  their  powers 
of  attorney  to  effect  this  operation,  at  the  same  time  being  furnished  with 
their  proxies,  to  vote  for  such  directors  as  he  might  see  fit,  which  of  course 
was  to  be  done  with  an  eye  to  his  own  subsequent  election  as  President 
of  this  new  State  Bank.  All  this  was  a  matter  of  arrangement  with  indi- 
viduals, respecting  their  own  private  property,  over  which  they  only  had 
the  control. 

If  the  Legislature  of  Pennsylvania,  in  granting  this  new  charter,  acted 
injudiciously,  or  imprudently,  or  granted  too  unlimited  privileges,  that  had 
nothing  to  do  with  the  charter  of  the  old  United  States  Bank ;  or  if  the 
stockholders  of  the  old  Bank,  in  thus  assenting  to  the  arrangement  of  the 
individual  proposed  to  be  at  the  head  of  the  institution,  and  in  thus  giving 
him  their  powers  of  attorney,  misplaced  their  confidence,  that  also  had 

12 


90 

nothing  to  do  with  the  charter,  or  the  character,  or  the  merits,  of  the  old 
Bank.  The  proceeding  was  simply  this,  that  the  individuals  holding 
shares  in  the  National  Bank,  converted  their  interest,  by  general  consent, 
into  so  many  shares  of  a  State  Bank. 

The  new  institution  being  now  organized,  and  in  operation,  it  remained 
only  to  purchase  from  the  Government  of  the  United  Stetes,  the  shares 
held  by  the  Nation  in  the  old  institution.  This  was  done  on  terms  highly 
favorable  to  the  country.  Not.  a  dollar,  it  is  believed,  was  lost  to  the 
public  Treasury  in  the  whole  of  the  transaction. 

The  United  States  Bank  of  Pennsylvania,  thus  becoming  the  proprietor 
of  all  the  shares  of  the  late  National  Bank,  became,  consequently,  the 
possessor  of  all  the  assets,  or  property,  of  that  institution  ;  and  these  as- 
sets constituted  its  capital  for  subsequent  operation.  That  is,  the  notes, 
and  bills,  and  bonds,  and  real  estate,  of  the  old  Bank,  and  of  all  its 
Branches,  became  the  property  of  the  new  State  Bank,  and  subject  to  its 
management.  From  this  time,  if  there  was  any  mismanagement  of  this 
property,  or  any  misapplication  of  the  funds  resulting  from  the  sales  of  it, 
this  misapplication,  or  mismanagement,  was  effected  under  the  authority 
of  the  charter  of  the  State  of  Pennsylvania*,  and  by  direction  of  officers 
appointed  by  the  stockholders  of  this  new  State  Institution. 

Thus  we  see  how,  with  nearly  the  same  name,  or  style,  the  same  Pres- 
ident, several  of  the  same  directors,  and  nearly  all  the  same  private 
shareholders — with  the  possession  of  the  same  assets,  or  property,  and 
the  same  amount  of  capital — the  United  States  Bank  of  Pennsylvania  was, 
and  is,  nevertheless,  an  institution  entirely  distinct  from  the  late  United 
States  Bank.  The  two  institutions,  so  far  from  being  mixed,  or  amalga- 
mated, actually  pursuing  each  its  distinet  and  respective  operations  at  the 
same  time.  One  under  a  new  President,  and  some  of  its  old  directors, 
closing  up  its  affairs  ;  the  other,  with  the  Ex-President,  and  a  newly  or- 
ganized Board  of  Directors,  pursuing  its  course  as  a  State  institution. 
An  institution  with  an  immense  capital  indeed,  and  what  was  called  a 
most  liberal  charter  — but  still,  merely  a  State  institution. 

We  shall  now  see  in  what  these  two  corporations  differed  essentially 
from  each  other. 

The  late  United  States  Bank  was  chartered  by  an  act  of  Congress,  ap- 
proved by  the  President  of  the  United  States.  The  United  States  Bank 
of  Pennsylvania,  was  chartered  by  an  act  of  the  Legislature  of  that  State, 
approved  by  the  Governor.  The  stockholders  of  the  late  United  States 
Bank,  paid  to  the  Nation  a  bonus  of  one  million  and  a  half  of  dollars,  in 
consideration  of  the  privileges  granted  by  its  charter,  the  use  of  the  public 
deposits,  and  the  advantages  of  the  government  circulation.  The  stock- 
holders of  the  United  States  Bank  of  Pennsylvania,  paid  to  that  State  a 
bonus  of  five  millions  of  dollars,  (besides  stipulating  to  make  some  heavy 
loans  for  certain  public  improvements,)  for  no  other  privilege  than  that  of 
a  charter  giving  the  conductors  of  the  company  an  unusual  degree  of 
license. 

The  late  National  Bank  possessed  the  power  of  establishing  Branches 
in  any,  or  all,  of  the  different  States,  and  thus  of  transacting  its  business 
on  equal  terms  with  other  Banks,  in  all  parts  of  the  country. 

The  State  Bank  possessed  no  such  power,  being  obliged  to  confine  most 
of  its  business  to  its  own  State  ;  and  elsewhere  acting  by  such  agents  as 
it  was  able  to  employ,  in  the  same  manner  as  a  private  individual 
might  do. 


91 

The  National  Bank  possessed  a  capital  of  thirty-five  millions  of  dollars, 
employed  by  means  of  its  Branches,  in  all  parts  of  the  United  States. 
Any  surplus  not  wanted  in  one  position,  being  easily  transferred  to  another, 
where  it  might  be  more  desirable.  Thus  having  no  stagnant  capital  to  be 
forced  into  any  unwarrantable  employment,  lest  the  interest  upon  it  should 
be  lost. 

The  State  Bank  possessed  the  same  thirty-five  millions  of  capital  at  its 
outset,  but  all  to  be  employed  by  one  Board  of  Directors,  in  one  State  ; 
except  such  part  as  might  be  confided  to  distant  agents.  This  immense 
amount  of  capital  for  a  single  State  Bank,  (so  much  beyond  the  wants  of 
its  own  vicinity,)  rendering  it  necessary  for  the  Board  to  invent  unusual 
modes  of  investment ;  and  thence  so  much  the  more  easily  prompting  to 
loans  on  securities  which,  under  other  circumstances,  might  have  been 
rejected. 

The  new  institution  thus  situated,  it  is  easy  to  conceive  of  the  tempta- 
tion placed  before  its  conductors — controling,  as  they  did,  such  an  over- 
whelming amount  of  capital— to  enter  into  large  speculations,  and  engage- 
ments, for  their  own  account.  Knowing  the  facility  with  which  they 
could  supply  themselves  with  funds,  and  perhaps  actually  considering 
themselves  to  be  promoting  the  interests  confided  to  their  care,  by  engag- 
ing to  pay  interest  for  immense  amounts  which,  but  for  their  enterprize, 
might  remain  unprofitably  idle. 

The  late  National  Bank,  besides  its  capital,  from  which  only  compara- 
tively a  small  bonus  was  to  be  deducted,  had  the  use  of  the  government 
deposits,  as  well  as  the  use  of  large  private  deposits  of  individuals  keeping 
accounts  with  all  its  Branches.  It  had  also,  as  agent  of  the  government, 
the  privilege,  and  faculty,  of  circulating  its  notes  in  all  the  States  in  pay- 
ment of  public  debts,  which  gave  these  notes  also  unusual  currency  for 
other  purposes.  The  interest  on  the  additional  available  capital  furnished 
by  these  items,  being  more  than  sufficient  to  pay  the  expenses  of  the  in- 
stitution, remunerate  the  bonus,  and  leave  a  fair  semi-annual  interest  for 
the  stockholders,  its  conductors  had  no  occasion  to  resort  to  unusual 
modes  of  investment.  The  legitimate  business  for  a  Bank,  of  lending 
money  by  discounting  notes,  and  dealing  in  bills  of  exchange,  being  all 
that  was  required  to  keep  the  entire  means  of  the  institution  employed. 

The  State  Bank,  on  the  contrary,  had  its  capital  diminished  in  the  out- 
set, by  the  payment  of  a  bonus  'disproportionately  large.  It  had  further  to 
lend  certain  large  sums  at  an  unusual  low  rate  of  interest ;  while  on  the 
other  hand,  it  had  no  advantage  of  any  public  deposits,  or  government 
circulation  :  the  private  deposes  of  the  Bank  being  confined  to  the  cus- 
tomers of  a  single  ciiy,  and  the  circulation  of  its  bills,  in  the  ordinary  way, 
being  of  a  very  limited  character.  Its  expenses,  therefore,  were  to  be 
paid  out  of  the  interest  accruing  from  the  remainder  of  its  capital  ;  making 
it  evident  that  without  resorting  «to  some  unusual  operation,  with  a  view 
to  profit,  there  was  little^chance  for  the  shareholders  of  obtaining  even  a 
fair  interest  on  the  whole  thirty-five  millions  of  capital. 

To  make  the  difference  more  sensible,  we  suppose,  for  example,  a  Na- 
tional Bank  of  discount,  with  twenty  Branches,  having  the  use  of  the  public 
moneys,  and  the  use  of  the  deposits  of  those  who  keep  an  account  with 
its  several  Branches,  together  with  the  use  of  the  capital  derived  from  its 
circulation,  both  for  government,  and  for  ordinary  purposes.  Its  capital 
stock  being  thirty-five  millions,  its  additional  capital  for  lending  purposes, 
derived  from  the  sources  above  mentioned,  may  be  put  down  at  thirty-five 


92 

millions  more,  including  the  average  amount  of  government  deposits.  It 
would  thus,  doing  the  ordinary  business  oflending  money,  be  able  to  obtain 
an  interest  of  six  per  cent,  upon  seventy  millions  of  dollars ;  equal  to 
twelve  per  cent,  on  its  capital  stock  of  thirty-five  millions.  Leaving 
ample  means  for  the  payment  of  all  expenses,  and  yielding  a  fair  dividend 
to  the  stockholders,  without  resorting  to  any  extraordinary  enterprizes. 

We  will  now  suppose  a  state  Bank  with  the  same  capital  stock  of  thirty- 
five  millions  of  dollars  ;  with  no  other  deposits  than  those  of  its  custom- 
ers in  one  city ;  and  no  circulation  except  a  share  of  that  which  is  com- 
mon to  all  state  Banks.  Its  additional  capital,  derived  from  these  sources, 
must  evidently  be  very  small, — perhaps  one  or  two  millions  of  dollars. 
After  paying  a  bonus  of  five  millions  of  dollars,  it  will  have,  therefore, 
but  about  thirty-one  or  thirty -two  millions  of  dollars  to  lend  ;  out  of  which 
the  expenses  of  the  institution,  and  its  agencies,  are  to  be  paid  ;  leaving 
no  probability  of  dividing  more  than  a  small  interest  on  the  whole  thirty- 
five  millions  of  capital  stock.  In  order  then  to  make  up  for  the  want  of 
additional  capital,  and  .to  do  something  to  meet  expenses,  the  credit  of  the 
Bank  must  be  used  ;  and  the  ingenuity  of  its  conductors  must  be  exer- 
cised in  devising  new  modes  of  Banking. 

Money  may  be  obtained  in  the  old  countries,  on  good  security,  at  the 
rate  perhaps  of  four  per  cent,  per  annum.  At  home  the  Bank  may 
lend  it  out  at  six  per  cent,  per  annum.  We  may  suppose  our  State 
Bank  now  to  be  involved  in  two  opposite  difficulties.  Its  immense  capi- 
tal is  too  large  for  its  location, — it  can  lend  but  a  small  part  of  it  in  the 
ordinary  business  of  Banking;  and  yet  if  it  do  not  lend  more  than  its 
capital  stock,  it  cannot  give  a  dividend  to  its  shareholders  equal  to  the 
interest.  To  obviate  the  first  difficulty,  the  Bank  goes  out  of  ils  usual 
course,  and  places  its  moneys  in  state  stocks,  railroad,  canal,  and  turnpike 
stocks,  and  other  Bank  stocks  ;  or  it  lends  to  States,  Banks,  and  other  par- 
ties ;  taking  these  stocks  as  security.  In  addition  to  which,  certain  con- 
ductors of  the  institution,  borrow  of  the  Bank,  on  security  of  large  ship- 
ments of  produce,  made,  or  being  made,  to  certain  ports  in  Europe. 

All  the  means  to  be  derived  from  the  capital  stock  of  the  Bank  being 
thus  employed,  to  meet  the  second  difficulty,  the  securities  thus  received 
for  loans  in  this  country,  are  forwarded  to  Europe,  where  a  large  portion 
of  the  amount  lent  upon  them,  if  not  the  whole,  is  reborrowed  at  a  low 
rate  of  interest ;  the  amount  thus  borrowed  abroad,  being  remitted,  or 
drawn  for,  is  again  lent  out  at  home,  by  the  Bank,  at  the  American  rate 
of  interest,  perhaps  upon  more  of  the  same  kind  of  securities.  More  of 
these  securities  are  again  sent  to  Europe  ;  more  money  is  borrowed  on 
them  at  the  low  rate,  and  being  alike  remitted,  or  drawn  for,  is  lent  out 
again  in  this  country,  at  the  higher  rate.  All  this  appears  a  very  favorable 
operation  ;  the  Bank,  perhaps,  making  a  profit  of  two  per  cent  clear, 
merely  for  placing  itself  between  the  American  borrower,  and  the  Euro- 
pean lender.  This  two  per  cent,  of  course,  will  go  far  towards  making 
up  any  deficiency  there  may  be  in  the  dividends  expected  on  the  capital 
stock,  after  paying  expenses. 

The  Bank  may,  in  this  way,  have  lent  seventy  or  eighty  millions  of  dol- 
lars, which  is  as  much  as  the  old  National  Bank  could  have  done  with  all 
its  advantages.  Meantime,  however,  the  securities  received  by  the  Bank, 
and  transmitted  to  Europe,  are  becoming  more  and  more  doubtful.  Some 
of  the  states,  perhaps,  threaten  to  repudiate  their  debts  ;  the  railways, 
canals,  and  turnpikes,  do  not  appear  to  be  wanted,  or  are  left  unfinished, 
for  want  of  further  means.  The  holders  of  the  securities  in  Europe,  be- 


93 

come  uneasy,  and  sacrifice  them  at  half  of  the  nominal  value,  to  reimburse 
the  loans  made.  The  property  shipped  shares  a  similar  fate  ;  and  yields 
but  about  half  the  amount  advanced  upon  it  by  the  Bank  ;  which,  thus 
losing  thirty  or  forty  millions  of  dollars  by  the  securities,  upon  which  it 
had  made  its  loans,  loses,  in  effect,  its  entire  capital.  The  whole  of  this 
disastrous  result  being  directly  traceable  to  the  two  peculiarities  alluded 
to  : — viz.  the  throwing  of  an  overwhelming  amount  of  capital  into  the 
confined  position  of  a  single  State  Bank  ;  and  the  necessity,  under  which 
such  a  Bank  must  labor,  of  doing  something,  out  of  the  ordinary  course 
of  its  business,  to  compensate  for  the  want  of  a  proportional  amount  of 
deposits,  and  circulation  ;  in  order  that  it  may  pay  expenses,  reimburse 
the  amouut  of  bonus  paid,  and  yield  a  fair  dividend  of  interest  to  its 
shareholders.  The  capital,  in  the  case  supposed,  designed  for  twenty-six 
states,  being  forced  into  the  vaults  of  a  single  Bank  !  A  capital,  which 
might  have  been  subdivided,  and  lent  out  under  the  direction  of  the  conduc- 
tors of  twenty-six  branches,  being  placed  altogether  at  the  discretion,  and 
under  the  management  of,  perhaps,  a  single  individual !  The  whole  of 
these  transactions,  with  their  unfortunate  results,  being  the  very  opposite 
of  any  thing  which  could  have  occurred  in  the  management  of  a  National 
Bank  of  discount,  with  its  proper  number  of  branches. 

Whatever  the  securities  may  have  been,  the  very  extent  of  the  loans 
made  upon  them  by  the  United  States  Bank  of  Pennsylvania,  is  a  proof 
of  the  soundness  of  the  condition  of  the  National  Bank,  from  which  this 
state  institution  derived  its  means  in  the  first  instance.  It  was  with  the 
assets,  or  property,  of  the  United  States  Bank,  properly  so  called,  that  the 
United  States  Bank  of  Pennsylvania,  was  enabled  to  pay  its  enormous 
bonus,  and  to  make  its  large  loans,  on  the  credit  of  state  stocks.  But  if 
any  doubt  remained  upon  this  point,  it  must  be  amply  met  by  referring  to 
the  repeated  investigations  made  into  the  condition  of  the  institution 
about  the  time  of  the  removal  of  the  deposits.  Investigations  made  by  an 
adverse  party,  with  every  disposition  to  detect  wrong,  if  wrong  were  to  be 
met  with ;  and  yet  all  resulting  in  a  report  favorable  to  the  character  of 
the  institution  for  soundness  and  stability.  So  much  so,  that  even  when 
the  fate  of  the  Bank  was  known,  and  the  certainty  of  the  liquidation  of 
its  affairs  was  fully  before  the  public,  the  price  of  the  stock  in  the  market 
fully  indicated  the  undiminished  confidence  of  the  shareholders ;  while 
the  price,  at  which  the  government  held  the  shares  of  stocks  belonging  to 
the  nation,  was  an  evidence  of  the  good  opinion  entertained  by  the  con- 
ductors of  the  administration  themselves,  of  the  value  of  the  assets. 

In  addition  to  this,  the  late  National  Bank  was  so  restricted  by  its  char- 
ter, that  its  conductors  could  not  have  fallen  into  the  mistakes  to  which 
the  same  individuals  were  subject  in  the  management  of  the  state  institu- 
tion. Five  of  the  directors  of  the  parent  board  were  appointed  by  gov- 
ernment ;  certain  changes  were  periodically  to  be  made  in  the  direction  ; 
no  loan  was  to  be  made,  even  to  the  United  States  government,  exceeding 
half  a  million  of  dollars  ;  and  no  Joan  to  any  state  exceeding  fifty  thou- 
sand dollars ;  the  Secretary  of  the  Treasury  was  authorized  to  call  for 
statements  weekly,  with  the  right  to  inspect  general  accounts.  Penalties 
for  dealing  in  goods  not  permitted,  were  to  be  enforced  to  three  times  the 
amount :  one  half  payable  to  the  informer ;  and  penalties,  for  loans  not 
permitted,  to  three  times  the  amount :  one  fifth  payable  to  the  informer. 
The  Bank  was  amenable  to  Congress,  and  subject  to  the  examination  of 
committees  of  either  branch  of  the  Legislature.  Its  privileges,  and  its 


94 

charter,  being  liable  to  forfeiture,  for  any  abuse  of  its  powers  ;  while  in 
Congress,  it  had  the  representatives  of  twenty-six  states  to  meet  as  judges  ; 
all  coming  from  districts,  where  other  Banks,  and  other  interests,  were 
fully  disposed  to  prefer  any  well-founded  accusations,  against  an  institu- 
tion acting  so  powerfully  as  a  check  upon  their  own  operations. 

The  State  Bank,  on  the  contrary,  enjoyed  the  advantage,  if  it  may  be 
called  such,  of  a  charter,  of  which  it  was  boasted  that  it  permitted  any 
thing,  and  every  thing.  The  corporation  was  accountable  only  to  the 
Legislature  of  its  own  state,  of  which  it  was  a  large  creditor.  It  had 
here,  too,  an  interest  in  common  with  other  Banks  of  the  same  state  ;  and 
several  important  works  of  internal  improvement  were  dependant  upon  its 
Joans.  Where  the  National  Bank  would  have  stood  alone  in  petitioning 
for  exemption  from  penalty,  in  case  of  a  suspension  of  specie  payments, 
this  State  Bank  enjoyed  the  co-operation  of  all  the  moneyed  institutions 
around  it.  Accordingly,  we  find,  that  the  united  influence  of  all  these 
state  institutions,  and  of  the  individuals  dependant  upon  them,  was  too 
powerful  not  to  secure  for  them  the  immunity  desired. 

Here,  indeed,  as  we  have  before  intimated,  is  the  peculiar  advantage  of 
a  National  Bank,  such  as  it  should  be,  in  its  operation  upon  the  Bank  cur- 
rency of  the  country ;  that  standing  alone,  with  little  or  no  hope  of  indul- 
gence from  the  national  government,  it  is  under  the  necessity  of  being 
rigorous  towards  itself ;  and  being  so,  it  is  unavoidably  rigid  in  its  require- 
ments of  others  ;  and  this  is  the  kind  of  rigor  so  indispensable,  as  a  pre- 
ventative,  for  insuring  the  sound  and  healthy  condition  of  all  the  moneyed 
institutions  of  the  country. 

So  far,  then,  from  the  possibility,  or  probability,  that  the  late  United 
States  Bank  was  subject  to  the  same  mismanagement,  or  that  any  National 
Bank  could  be  subject  to  the  abuse  of  power  witnessed  in  the  manage- 
ment of  the  State  Institution  alluded  to,  as  well  as  of  many  other  state  in- 
stitutions, there  can  be  no  doubt,  that  if  a  National  Bank,  such  as  the 
country  had  seen  in  operation  for  forty  years,  had  continued  to  exist  while 
this  Pennsylvania  United  States  Bank,  with  other  State  Banks,  was  plung- 
ing itself  into  difficulties,  the  abuses  and  mismanagement  in  question, 
never  would  have  occurred  to  such  a  lamentable  extent :  as  every  state 
institution  of  the  kind,  imprudently  conducted,  would  then  have  received 
a  timely  check  to  its  issues,  arresting  its  hazardous  proceedings  at  their 
outset. 


SECTION  VIII. 

Other  Objections :  want  of  Suitable  Conductors. — Banks  Regulating  them- 
selves.— Corrupt  Influence. 

It  has  been  said,  that  "  a  National  Bank  is  a  good  thing,  provided  an- 
gels can  be  procured  to  conduct  it." 

We  have  seen  that  such  an  institution  is  much  less  liable  to  mismanage- 
ment than  a  state  corporation  ;  and  we  might  reply  to  the  objection,  that 
if  State  Banks  were  all  under  the  direction  of  angels,  such  a  regulator  as 
a  National  Bank  would  be  unnecessary. 

All  state  institutions,  however,  being  under  the  conduct  not  of  angels, 
but  of  men,  governed  and  stimulated  by  a  regard  to  their  own  pecuniary 
interests,  a  National  Bank  becomes  the  more  necessary  to  counterbalance 


95 

and  provide  against  the  abuses  to  which  the  powers  of  state  corporations 
are  liable  ;  it  being  only  those  disposed  to  abuse  these  privileges,  which 
can  have  reason  to  object  to  the  counterpoise  thus  provided. 

Human  motives  being  such  as  they  are,  and  all  moneyed  institutions 
being  directed  by  persons  having  a  regard  mainly  to  their  own  pecuniary 
interests,  the  evil,  whatever  it  may  be,  resulting  from  these  circumstances, 
is  to  be  remedied  by  a  judicious  balancing  of  the  interests  of  one  class 
of  persons  with  those  of  another.  Where  there  is  a  tendency  to  expan- 
sion on  one  side,  it  must  be  met  by  something  which  in  its  own  nature  has 
an  equal  tendency  to  restraint.  In  this  matter,  so  deeply  interesting  to 
the  national  welfare,  it  is  as  unreasonable  for  those  restrained  to  object  to 
the  regulating  operation  of  a  National  Bank,  as  it  would  be  for  the  wheels 
of  a  time-piece  to  object  to  the  action  of  the  pendulum. 

The  objection  to  a  National  Bank,  that  it  must  be  governed  by  men, 
and  not  angels,  might  with  equal  force  be  urged  against  all  the  institutions 
of  government.  The  executive,  the  legislative,  the  judicial  powers,  are 
all  in  the  hands  of  men,  subject  to  the  influence  of  selfish  passions  and 
motives  ;  and  it  is  for  this  reason,  that  the  use  of  power  in  one  department 
is  required  to  counterbalance  its  use,  and  to  provide  against  its  abuse  in 
another. 

Kgain  it  is  said  by  a  certain  class,  as  already  noticed,  that  trade  should 
regulate  itself.  "  Leave  every  Bank,"  they  say,  "  to  pursue  its  own  course, 
and  suffer  the  consequences  of  its  own  folly  ;  the  evil  will  prove  its  own 
cure." 

This  objection  might  be  urged  with  greater  propriety,  if,  in  the  matter 
of  Banks,  trade  were  left,  or  had  been  left  to  regulate  itself  in  the  first  in- 
stance. If  Banks  were  not  incorporated  institutions.  If  they  were  not 
creatures  of  legislation.  If  those  concerned  in  Banks  were  not  exempt- 
ed from  personal  responsibility.  If  the  stockholders,  directors  and  offi- 
cers of  these  corporations  were  liable  in  their  persons  and  property.  If 
they  were  jointly  and  severally  held,  for  all  the  engagements  of  their  in- 
stitutions, on  the  ordinary  principles  of  copartnership.  In  such  case,  they 
might  perhaps,  like  other  establishments  in  trade,  be  left  to  themselves  ; 
but  then  the  peculiar  advantages  set  forth,  as  arising  from  the  invention  of 
incorporated  Banks,  would  be  lost  to  the  people  and  to  the  country.*  The 
principle  of  free  trade,  then  having  been  once  encroached  upon,  by  ex- 
onerating the  parties  interested  in  a  Bank,  from  individual  liability,  the 
evils  resulting  from  this  first  encroachment  must  be  provided  against  by 
some  counteracting  check. 

Persons  acting  on  their  own  responsibility,  liable  in  their  persons  and 
property,  act  so  much  the  more  cautiously.  Release  them  from  these  conside- 
rations of  restraint,  and  the  same  individuals  may  conduct  very  differently. 
The  incorporation  of  moneyed  institutions  is  attended  with  some  evil,  but 
it  is  also  productive  of  great  benefit.  The  course  of  wisdom  is  to  provide 
against  the  evil  that  the  good  may  be  preserved.  Where  no  ox  is,  the  crib 
is  clean  ;  but  much  increase  is  by  the  strength  of  the  ox. 

Suppose  all  incorporated  moneyed  institutions  to  be  left  to  themselves. 
Managed  as  they  are,  by  persons  released  from  all  personal  liability,  ex- 
cept for  technical  crime,  the  probability  is,  that  in  a  few  years  the  confi- 

*  See  Section  III.  Part  I. 


96 

dence  of  the  public,  and  of  the  capitalist,  large  and  small,  would  be  en- 
tirely withdrawn  from  them.  Those  already  in  existence,  would  use 
themselves  up,  and  no  new  ones,  or  comparatively  none  would  go  into  ope- 
ration. This  may  be  called  the  remedy  ;  but  this  is  a  remedy  at  the  ex- 
pense of  the  whole  subject,  it  is  the  same  kind  of  remedy  as  that  which 
death  brings  to  the  suffering  dyspeptic.  It  is  as  if  a  farmer  were  to  kill 
his  oxen  to  save  himself  the  trouble  of  cleansing  their  stalls. 

The  argument  that  trade  should  regulate  itself,  might  as  reasonably  be 
applied  to  merchants  individually  as  to  Banks.  The  merchant,  it  may  be 
said,  will  suffer  the  consequences  of  his  own  folly,  and  therefore  he  should 
not  be  subject  to  a  suit  at  law.  In  this  way  the  whole  community,  as  to  money 
matters,  may  be  reduced  to  a  state  of  anarchy.  The  shareholders  of  in- 
corporated Banks,  and  those  who  have  placed  confidence  in  these  institu- 
titutions,  may  suffer  the  consequences  of  the  folly,  or  of  the  imprudence 
of  the  directors  ;  but  these  directors  themselves  escape,  provided  no 
crime,  in  the  eye  of  the  law,  can  be  alleged  against  them.  If  the  Banks 
then  are  left  to  themselves,  that  is,  without  a  check  upon  their  corporate 
operations,  the  stockholders,  and  the  public  are  left  unprotected  against 
every  thing  but  actual  crime  :  the  case  being  even  worse  than  that,  in 
which  the  private  trader  is  exempt  from  the  course  of  the  law.* 

If  instead  of  this,  the  State  Banks  are  kept  in  check  by  the  operation  of 
a  National  Institution,  the  same  cause  protects  the  innocent  shareholder  from 
suffering  for  the  weakness  or  incompetency  of  those  to  whose  manage- 
ment the  affairs  of  his  institution  have  been  entrusted.  Experience  hav- 
ing already  taught  us,  that  of  the  immense  amount  of  losses  suffered  by 
the  stockholders  of  various  State  Banking  corporations  within  a  few  years, 
almost  the  whole  amount  would  have  been  saved,  had  there  been  no  lapse 
of  time  during  which  these  institutions  were  without  the  check  of  a  Na- 
tional Bank  of  discount  and  deposit ;  and  however  unwelcome  such  a 
check  may  appear  to  the  conductors  of  institutions,  desirous  of  a  certain 
latitude  of  proceeding,  we  find  that  in  effect,  it  is  no  more  unwelcome  than 
the  various  regulations  of  State  Legislation  substituted  for  it. 

In  the  State  of  New  York,  for  instance,  in  place  of  the  regulating  ope- 
rations of  a  National  Bank,  all  the  Banks  of  the  State  are  required  to  pay 
a  certain  annual  tax  to  meet  the  defalcation  of  any  single  Bank.  They 
are  required  to  exhibit  the  state  of  their  affairs  periodically  to  commis- 
sioners appointed  by  the  government ;  and  they  are  required  to  make  such 
returns  to  the  State  Legislature  at  the  close  of  every  year,  as  not  only  to 
subject  them  to  great  inconvenience  ;  but  such  as  usually,  to  produce  at 
this  period  a  species  of  collapse  in  all  pecuniary  concerns  throughout  the 
State.  All  which  was  unnecessary  during  the  existence  of  the  late  Na- 
tional Bank,  and  that  of  its  predecessor  ;  and  would  be  again  unnecessary 
if  a  similar  National  Institution  were  again  in  operation. 


*  Such  is,  in  some  measure,  the  principle  upon  which  banking  associations  are 
now  organized  in  the  State  of  New  York.  The  public  are  supposed  to  be  protected 
against  loss  from  the  circulation  of  these  associations,  by  certain  securities  deposited 
to  secure  the  payment  of  their  bills.  But  the  stockholders  are  without  any  security 
except  that  of  the  good  character  and  ability  of  the  managers  of  their  property. 
If  the  institution  prove  to  be  in  good  and  able  hands,  all  may  go  well,  but  if  other- 
wise, the  stockholder  loses  every  thing.  The  result  of  this  experiment  must  be  that 
with  some  few  exceptions,  confidence  will  be  withdrawn,  and  capital  will  seek  em- 
ployment where  it  finds  more  security. 


97 

Some  objectors  to  a  National  Bank,  have  made  use  of  an  argument, 
which  if  it  prove  anything,  proves  too  much. 

The  large  resources  of  such  an  institution,  are  said  to  enable  its  con- 
ductors to  exercise  an  improper  influence  in  the  National  Legislature.  In 
other  words,  may  enable  it  to  bribe  members  of  Congress.  And  it  is  even 
maintained  by  some,  that  such  corruption  was  practised  amongst  the  ef- 
forts made  to  obtain  a  renewal  of  the  charter  of  the  late  Bank,  in  the  way 
of  granting  loans,  if  not  in  that  of  gratuities.  The  suspicion  itself  is  un- 
worthy of  being  entertained,  not  so  much  on  account  of  the  Bank  as  on  ac- 
count of  the  estimation  in  which  the  representatives  of  the  people  should  be 
held.  But  admitting  that  there  were  any  foundation  for  such  apprehension, 
how  much  more  reason  is  there  to  dread  the  employment  in  this  way,  of  the 
united  power  of  several  hundred  State  Banks.  If  there  be  danger  in  trusting 
the  representatives  of  the  people,  to  the  influence  of  twenty  directors  of  a 
National  Bank,  with  a  capital  of  thirty-five  millions  of  dollars,  how  much 
more  danger  must  there  be  in  exposing  them  to  the  influence  of  fifteen  or 
twenty  thousand  directors,  and  officers  of  seven  or  eight  hundred  State 
Banks,  with  an  aggregate  capital  of  three  hundred  and  fifty  or  four  hun- 
dred millions  of  dollars  ;  making  loans  perhaps  to  the  extent  of  five  hun- 
dred millions.  We  have  seen,  that  if  it  were  for  the  interest  of  the  con- 
ductors of  the  late  United  States  Bank  to  have  their  charter  renewed,  there 
is  equal  reason  to  believe,  that  the  parties  connected  with  the  State  Banks, 
or  a  great  number  of  them,  deemed  it  for  the  interest  of  their  institutions 
to  prevent  this  renewal.  And  we  know  how  much  easier  it  must  be  to 
collect  a  large  amount  for  promoting  a  common  object  from  a  great  number 
of  establishments,  and  individuals,  than  to  obtain  a  much  smaller  amount 
from  a  single  institution,  especially,  where  secrecy  is  required  in  view  of 
anticipated  examinations.  In  the  way  of  loans  too,  there  can  be  no  doubt 
that  the  State  Banks  have  a  much  better  opportunity  of  accommodating  a 
large  number  of  individuals  in  public  life,  than  a  National  Bank  with  all 
its  Branches  could  have. 

We  have  then  the  fact  before  us,  that  the  late  United  States  Bank  not- 
withstanding all  its  imputed  powers  of  influence  could  not  obtain  a  ma- 
jority of  two  thirds  in  Congress  ;  although  more  than  a  majority  of  the 
whole  number  were  in  favor  of  its  continued  existence  ;  neither  could  it 
operate  a  change  on  the  mind  of  the  individual  occupying  the  Presidential 
chair,  or  of  his  confidential  advisers.  On  the  other  hand,  the  issue  was 
precisely  such  as  to  meet  trie  views  of  the  State  Banks,  whose  united  mo- 
ney power  was  more  than  ten  times  that  of  the  National  Bank. 

It  would  be  just  as  reasonable,  therefore,  to  suppose  members,  who 
voted  on  the  side  of  the  State  Banks,  subject  to  corruption  from  that  quar- 
ter ;  as  to  suspect  those  who  voted  in  favor  of  a  National  Bank.  And 
there  is  just  as  much  ground  for  apprehension,  that  several  hundred  State 
Banks,  with  their  hundreds  of  millions  of  capital,  might  operate  upon  the 
mind  of  a  chief  magistrate  to  obtain  his  veto  ;  as  there  is  to  fear,  that  a 
single  National  Bank,  whose  concerns  are  all  subject  to  the  inspection  of 
government  officers,  and  of  committees  of  Congress,  might  employ  any 
considerable  portion  of  its  funds,  in  obtaining  from  the  National  Legisla- 
ture,'by  bribery,  any  indulgences  not  otherwise  to  be  procured.  Especi- 
ally when  it  was  so  well  known  that  all  these  efforts  could  and  would  be 
rendered  abortive  by  the  opposition  of  a  single  person  for  conciliating,  whose 
good  will,  no  efforts  had  been  made.  Certainly  if  bribery  were  the  course 
to  be  pursued  in  a  case  like  this,  it  would  be  much  more  rational  for  a 

13 


98 

body  of  men  to  address  themselves  to  the  individual  possessing  the 
greatest  power,  especially  if  the  pecuniary  circumstances  of  this  indi- 
vidual were  not  very  independent,  than  to  waste  efforts  upon  two  or  three 
hundred  members  of  a  Legislature,  whose  purchased  favor  after  all  might 
prove  entirely  unavailing. 

Objections  of  this  kind  are  arguments  in  favor  of  a  National  Bank,  as 
they  show  the  expediency  of  maintaining  a  balance  of  power  between  op- 
posite moneyed  interests  ;  each  jealously  disposed  to  watch  the  operations 
of  the  other. 


CONCLUSION. 


We  have  now  seen  the  use  of  capital,  and  the  importance  of  economi- 
sing this  use  ;  the  inactivity  of  capital  being  equal  to  the  loss  of  so  much 
power.  We  have  seen  the  use  of  Banks,  in  giving  the  requisite  activity  to 
dormant  capital,  by  their  stocks,  by  their  deposits,  and  by  their  paper  cir- 
culation ;  arid  we  have  seen  the  necessity  of  confining  the  action  of  these 
institutions  to  the  employment  of  real  capital,  in  opposition  to  the  employ- 
ment of  that  fictitious  capital,  which  if  unchecked,  they  must  be  the  means 
of  creating. 

We  have  noticed  the  difference  between  real  and  fictitious  capital ;  and 
the  mischief  arising  from  an  accumulation  of  the  latter  wherever  it  is  pro- 
duced. And  we  have  thence  seen  the  necessity  of  restricting  the  opera- 
tions of  all  Banks  to  their  proper  specie  paying  limits. 

We  have  seen  too,  that  without  such  restriction,  fictitious  capital  will 
not  only  be  created,  and  become  a  source  of  common  disaster,  but  that  it 
will  accumulate  in  some  sections  of  the  country  much  more  than  in  others  ; 
giving  rise  to  inequalities  in  the  currency,  ami  consequent  instability  in 
the  exchanges :  thence  involving  the  government  in  the  predicament  of 
adopting  on  the  one  hand  a  hard  money  system,  necessarily  depriving  the 
country  of  the  use  of  so  much  capital,  or  on  the  other,  of  collecting  the 
public  dues  in  bank  paper,  variously  depreciated,  with  certain  loss  to  the 
treasury,  while  the  public  burthens,  in  opposition  to  an  express  provision 
of  the  constitution,  fall  unequally  upon  the  citizens  of  different  states. 

We  have  seen  that  the  sufe  guard  against  the  tendency  of  Banks  to 
create  fictitious  capital,  and  the  tendency  of  this  fictitious  capital  to  pro- 
duce unequal  depreciations  of  the  paper  currency,  is  to  be  found  in  the  opera- 
tion of  a  NATIONAL  BANK  of  discount  and  deposit,  of  sufficient  capital,  with 
Branches  in  the  several  states.  Such  an  institution,  aided  by  its  operation 
as  an  agent  for  the  public  treasury,  and  by  its  faculty  of  discounting  notes 
and  bills,  acting  as  a  check  upon  the  issues  of  other  Banks  in  all  parts  of 
the  country :  the  faculties  of  discounting,  and  of  establishing  Branches ', 
being  essential  to  its  efficiency. 


99 

We  have  seen  that  this  operation  of  a  National  Bank  cannot  prejudice 
the  rights,  or  abridge  the  legitimate  privileges  of  any  well  conducted  money- 
ed institution  :  while  it  enables  the  government  safely  to  collect  its  revenue 
in  Bank  paper ;  and  as  safely  to  keep  the  moneys  accruing  from  that  revenue, 
in  a  place  assigned  by  law  :  — without  the  necessity  of  abstracting  so  much 
capital  from  circulation,  or  of  confining  the  amounts,  whether  in  paper  or 
in  the  precious  metals,  in  vaults  and  safes  :  and  thus  too,  without  affording 
to  any  administrators  of  the  government,  the  opportunity  of  influencing 
wealthy  and  powerful  portions  of  the  community  by  indirect  loans,  or  pre- 
mises of  such  loans  ; — an  influence  unavoidably  incident  to  a  distribution 
of  the  public  deposits  amongst  various  favored  institutions. 

We  have  on  the  other  hand,  examined  the  objections  made  to  the  es- 
tablishment of  a  National  Bank,  and  even  to  the  existence  of  all  Banks, 
and  we  have  seen  that  none  of  them  can  be  founded  in  a  regard  for  the 
well  being  or  prosperity  of  the  laboring  classes. 

The  rich  capitalist  and  his  agent,  as  we  have  aeen,  may  object  to  all 
Banks,  and  especially  to  a  National  Bank,  for  it  is  their  interest  to  keep 
the  business  of  money  lending  to  themselves. 

The  dealer  in  exchanges,  or  in  Bank  bills  may  very  well  object  to  the 
operation  of  a  National  Bank,  for  he  wants  no  institution  to  sell  bills 
cheaper  than  he  can  do  himself;  and  the  greater  the  difference  there  is 
in  the  currency,  and  the  more  instability  and  confusion  there  is  in  the  do- 
mestic exchanges,  the  better  for  his  trade. 

State  Banks  may  not  want  a  National  Bank  ;  especially  a  Bank  of  dis- 
count, with  Branches.  They  do  not  want  the  competition  of  snch  an  in- 
stitution. They  may  fear  that  it  will  lessen  their  own  deposits,  and  their 
own  circulation,  and  perhaps  take  away  some  of  their  best  customers. 
Some  of  them  do  not  like  the  idea  of  restriction.  They  do  not  wish  to  be 
checked.  They  do  not  wish  to  be  regulated.  Many  individuals,  too, 
connected  with  these  Banks,  may  object.  It  may  interfere  with  their 
speculations.  They  cannot  monopolize  so  much  ;  nor  hold  their  monopo- 
lized produce  so  long.  Great  capitalists  may  object.  They  want  high 
prices  even  at  the  expense  of  a  depreciated  currency.  Banks  recklessly 
managed,  and  moneyed  institutions  already  insolvent,  may  object.  For 
the  action  of  a  National  Bank  upon  them,  must  necessarily  test  their 
soundness,  and  expose  their  mismanagement.  A  few  Banks,  too,  may 
object,  because  they  hope  to  obtain  the  use  of  the  public  moneys  them- 
selves, and  to  be  themselves  employed  in  their  several  districts  as  agents 
of  the  Government. 

We  have  inquired  how  it  is  that  a  mistaken  apprehension  has  been 
formed  of  the  character  and  operations  of  a  National  Bank,  amongst  a 
certain  portion  of  the  people  ;  and  how  it  is  that  this  misconception  has 
led  to  an  equal  prejudice  against  all  Banks,  and  all  moneyed  corporations; 
and  we  have  traced  this  prejudice  to  a  certain  systematic  arrangement,  in 
which  the  interests  of  a  powerful  Bank  party  on  the  one  side,  and  those 
of  an  aspiring  candidate  for  office  on  the  other,  were  the  only  interests 
consulted.  The  case,  indeed,  is  a  supposed  one  ;  but,  whether  supposed 
or  real,  of  the  correctness  of  the  application  every  one  can  judge.  That 
many  of  the  most  active  opposers  of  a  National  Bank,  are  equally  opposed 
to  a  hard  money,  and  to  a  Sub-Treasury,  system,  is  notorious  ;  and  it  is 
for  the  people  to  inquire  why  this  is  so. 

We  have  seen  that  the  ruinous  speculation  which  took  place  soon  after 
the  establishment  of  the  late  United  States  Bank,  confined  as  it  was  to  the 


100 

scheming  operations  of  a  few  individuals,  arose  from  a  defect  in  the  char- 
ter of  the  Bank,  easily  provided  against  upon  any  future  occasion.  We 
have  also  seen  that  the  strange  mismanagement  of  the  existing  United 
States  Bank  of  Pennsylvania,  so  called,  was  almost  an  unavoidable  conse- 
quence of  the  fact,  that  this  institution  was  merely  a  State  Bank,  abso- 
lutely incumbered  with  the  immense  resources  of  the  late  National  Bank, 
for  which  it  was  a  pretended  substitute  ;  while,  like  other  local  institu- 
tions, it  was  free  from  the  operation  of  any  existing  National  Regulator,  to 
check  the  imprudence  or  extravagance  of  its  conductors.  The  absence 
of  such  a  Regulator  operating  the  ruin  of  that  State  Institution,  as  it  has 
done  the  ruin  of  multitudes  of  others,  differing  from  it  only  in  the  magni- 
tude of  their  capitals  and  resources. 

Finally,  we  have  seen  the  futility  of  the  very  feeble  objections  to  a  Na- 
tional Bank,  drawn  from  a  mistaken  view  of  it  as  a  monopoly — from  the 
difficulty  of  procuring  suitable  conductors — and  from  the  danger  of  its 
supposed  influence  upon  any  of  the  organs  of  Government. 

We  have  now,  we  may  say,  the  whole  subject  before  us. 

Without  a  National  Bank,  such  as  we  have  described,  and  such  as  the 
country  has  been  perfectly  familiar  with,  the  funds  of  the  Government 
become  a  means  of  perpetuating  the  political  power  of  a  few  designing 
men  ;  and  of  enabling  a  small  number  of  individuals  to  profit  by  the  use  of 
an  extraordinary  amount  of  capital,  at  the  public  expense. 

Without  such  a  Bank,  the  taxes,  duties,  and  sales  of  public  lands,  must 
be  paid  in  different  States  in  bank  money  at  unequal  rates  ;  unless  re- 
course be  had  to  a  hard  money  system,  depriving  every  branch  of  industry 
of  a  large  part  of  the  available  capital  upon  which  it  is  dependant. 

Without  such  a  National  Bank,  the  issues  of  the  State  Banks,  and 
Banking  associations,  already  nearly  one  thousand  in  number,  cannot  be 
restrained  within  a  specie  paying  limit;  and  without  such  restraint,  the 
operations  of  most  of  them,  progressing  from  one  degree  of  excess  to 
another,  must  terminate  in  discredit  and  insolvency. 

Without  such  a  National  Institution,  the  advantages  of  capital  brought 
into  use  through  the  instrumentality  of  Banks,  are  lost.  For  without  Bank 
capital,  and  Bank  facilities,  the  young  and  the  industrious,  and  all  in  mod- 
erate circumstances,  will  be  unable  to  purchase  on  credit,  because  their 
notes  can  no  longer  be  discounted. 

Without  a  National  Bank,  the  sound  State  Banks  cannot  introduce  their 
paper  into  circulation.  The  mechanic  and  th^  laborer  will  be  paid  in  de- 
preciated bank  notes,  the  worst  bills  being  the  most  circulated,  and  the 
most  unprincipled  conductors  of  the  worst  Banks  most  benefited. 

In  fine,  without  a  National  Bank,  the  rich  may  become  richer,  and  the 
poor  will  certainly  become  poorer  ;  while  the  whole  country  must  witness 
the  results  of  reckless  speculation  in  one  class,  and  of  despairing  idleness 
in  another. 

On  the  other  hand.  With  a  National  Bank,  possessing  the  requisites 
supposed,  local  Banks  capable  of  being  restored,  may  be  assisted.  A 
paper  currency  equal  to  specie  will  circulate  through  the  Nation  ;  and  the 
enchanges  between  the  different  States  will  be  equalized.  The  local 
Banks  worthy  of  credit,  will  be  enabled  to  retain  the  full  benefit  of  their 
respective  powers  ;  each  performing  its  functions  in  its  peculiar  sphere  — 
each  enjoying  its  share  of  paper  circulation,  and  of  public  confidence. 

With  such  a  National  Bank,  the  public  burthens  will  fall  equally  in  all 
the  different  States,  because  in  all,  the  revenue  will  be  paid  in  bank  paper 


101 

of  equal  value,  without  hazard  to  the  Government,  and  without  loss  to  the 
country.  Real  capital,  now  giving  way  to  fictitious,  will  come  out  of  its 
hiding  places,  as  if  no  longer  fearful  of  contamination  ;  and  real  capital, 
procured  at  the  lowest  rate  of  interest,  will  be  brought  from  distant  places 
and  countries,  where  it  is  less  wanted,  to  every  region  of  our  territory 
where  there  is  a  demand  for  it. 

With  a  National  Bank,  the  South  and  West  will  be  supplied  with  new 
means  ;  while  the  North  and  East  are  benefited,  in  proportion  as  their 
Southern  and  Western  customers  are  in  better  circumstances.  The  con- 
fidence of  the  wealthy,  both  at  home  and  abroad,  in  our  various  moneyed 
and  manufacturing  institutions,  will  revive.  The  stocks  of  these  will  again 
become  desirable  objects  of  investment ;  and  this  accession  of  real  capital 
will  give  a  new,  but  not  imaginary,  value  to  objects  of  enterprize,  now 
languishing  from  want  of  pecuniary  support. 

In  fine,  with  a  National  Bank,  the  public  moneys  will  be  safe.  Safe 
from  peculation,  and  safe  from  corrupt  abuse  ;  while  the  real  capital  they 
afford,  will  circulate,  free  from  the  bias  of  political  favoritism,  in  every 
channel  of  industry  throughout  the  Nation. 

Fellow  citizens — It  is  for  you  to  judge  of  the  correctness  of  this  com- 
parison. It  is  for  you,  too,  to  take  into  consideration  the  private  interests 
operating  upon  the  minds  of  objectors  to  a  National  Bank.  It  is  for  you 
to  compare  these  interests  with  the  objections  made.  When  called  upon 
to  oppose  the  incorporation  of  such  a  National  Institution,  or  to  put  down 
the  State  Banks,  or  to  array  yourselves  in  a  pertinatious  hostility  to  all 
Banks,  it  is  for  you  to  inquiry  into  the  peculiar  circumstances,  and  private 
reasons,  of  the  individuals  making  this  call  upon  you.  Place  their  motives, 
such  as  you  have  reason  to  suppose  them,  by  the  side  of  their  objections. 
Inquire  in  what  respect  their  circumstances  differ  from  yours,  and  how  far 
their  interests  should  operate  upon  your  minds.  Judge  of  their  arguments 
as  you  would  of  the  testimony  of  a  witness  upon  the  stand,  for  whose 
prejudices  and  private  feelings,  and  peculiar  relations,  you  felt  yourselves 
called  upon  to  make  suitable  allowance. 

The  subject  is  with  you.  I  do  not  ask  your  acquiescence  in  my  opin- 
ions. I  ask  only  your  patient,  fair,  investigation  of  the  whole  matter : 
discussed  upon  its  own  merits,  apart  from  all  party,  or  political  associa- 
tions: aided  only  by  the  comparison,  which  the  recollections  of  many  of  you 
will  enable  you  to  make,  between  the  present  state  of  the  country,  and  its 
state  during  the  greater  part  of  that  period  when  a  National  Bank  was  in 
full  operation. 

If  you  have  hitherto  acted  under  mistaken  apprehensions,  I  ask  only  a 
magnanimous  expression  of  your  change  of  opinion.  If,  after  mature 
consideration,  you  come  to  the  conclusion  that  a  National  Bank  of  discount 
and  deposit,  with  Branches  in  the  several  States,  is  essential  to  the  pros- 
perity of  the  country,  I  ask,  for  your  country's  sake,  that  you  unite  with 
one  voice  to  demand  of  your  rulers,  the  incorporation  of  such  an  institu- 
tion. 


102 


APPENDIX. 


FOR  some  years  previous  to  the  closing  of  the  operations  of  the  late 
United  States  Bank,  the  greatest  difference  of  exchange  charged  on  inland 
bills  discounted  by  the  Branch  in  New  York,  was  J  per  cent.  The  ex- 
change on  places  north  and  east  of  the  District  of  Columbia,  inclusive,  was 
at  par.  On  New  Orleans,  Mobile,  and  seaports  in  North  and  South  Caro- 
lina, I  to  J  per  cent.  On  other  places,  varying  only  from  \  to  ^  per  cent. 

The  following  are  rates  of  exchange  quoted  at  New  York,  5th  Febru- 
ary, 1842:— 

Bills  on  Philadelphia, 6    and    6i  dis. 

Bills  on  Baltimore, •     .     3|  and 

Bills  on  Richmond, 8-J  and 

Bills  on  North  Carolina, 5 

Bills  on  Charleston, 1 

Bills  on  Savannah, 

Bills  on  Augusta, 4 

Bills  on  Columbus, 16    and  17    dis. 

Bills  on  Macon, 13    and  14    dis. 

Bills  on  Mobile, 14    andH^dis. 

Bills  on  New  Orleans, 6^  and    6f  dis. 

Bills  on  Louisville, 11     and  12    dis. 

Bills  on  Nashville, 15    and  18    dis. 

Bills  on  Natchez, 25    and  30    dis. 

Bills  on  St.  Louis, 14    and  15    dis. 

Bills  on  Cincinnati, 13J  and  14    dis. 

Bills  on  Michigan, 9    and  10    dis. 

The  following  are  the  different  rates  of  discount  on  bank  bills  :  — 
On  bills  of  good  Banks  in  the  State,  \  to  1^  per  cent. ;  on  bills  of 
doubtful  Banks,  20,  25,  37,  40,  and  50,  per  "cent.  On  bills  of  Banks  in 
New  Jersey,  from  i  to  7  per  cent.  Pennsylvania,  7  to  10  per  cent. 
Delaware,  8  to  10.  Maryland,  5.  District  of  Columbia,  5.  Virginia, 
8.  North  Carolina,  6.  South  Carolina,  3  to  4J.  Georgia,  10.  Alabama. 
20.  Louisiana,  10  to  25.  Kentucky,  12.  Ohio,  20.  Indiana,  17.  Illi- 
nois, 20  to  25. 


103 


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CONTENTS. 


INTRODUCTORY  ADDRESS. 

PART  FIRST. 

Page 

Section  1.  Use  and  Importance  of  Money  Capital,  .          .  5 

Sect.  2.  Discrimination  to  be  made  between  real  and  fictitious  capital,  8 
Sect.  3.  Utility  of  Banks  in  collecting  and  bringing  into  use  real  capital, 
by  their  Stocks,  their  Deposits,  and  their  Circulation,          .         .  12 

Sect.  4.  Tendency  of  Banking  operations  to  expansions,  and  to  the  cre- 
ation of  fictitious  capital,  .  .....  18 

Sect.  5.  Operation  of  Bank  expansion  upon  the  currency,         .  23 

Sect.  6.  Effects  of  a  depreciation  of  the  currency,          .         .  24 

PART  SECOND.  " 

Sect.  1.  Advantages  of  a  National Ipank,  ....  31 

Sect.  2.  Its  operation  upon  the  ^jftcal  Banjos,  ...  33 

Sect.  3.  Operation  of  a  National1  Barvk  upon  ff^c,  domestic  exchanges,  37 
Sect.  4.  Operation  of  a  National  Bank  as  a*Fiscal  Agent,  .  41 

Sect.  5.  Operation  of  a  National  Balnk  in  bringing  forward  a  supply  of 

real  capital.  .  .  .  - '  ;.  .  •!  j  •  •  •  •  45 

Sect.  6.  Operation  of  a  National  Bank  in  meeting  the  constitutional 

requisitions,  &c.       .  49 

PART  THIRD. 

Sect.  1.  Parties  having  an  interest  in  opposition  to  all  Banks,  or  any 
new  Bank.  .  .  .  .  .  «. -...-.'  '•  :  •  •  '  •  54 

Sect.  2.  Interests  opposed  to  a  National  Ifenk-^TSe\case  of  rich  men, 
and  money  dealers.  .  .  .  •  V  '  '*<  *  '  '56 

Sect.  3.  Case  of  sellers  of  foreign  exchange.  .  •£ "    .         .  58 

Sect.  4.  Interests  of  State  or  Local  Banks,  in  opposition  to  a  National 
Bank ....;...  61 

Sect.  5.  Objection  arising  from  a  suppospd  hostility  of  the  people  to  a 
National  Bank,  and  to  all  Banks.  .  ....  67 

Sect.  6.  Objection  arising  from  the  management  of  the  late  United 
States  Bank — Stock  speculation — Fluctuations  in  trade — Expansion  and 
reaction.  ..........  80 

Sect.  7.  The  United  States  Bank  of  Pennsylvania.         .         .  88 

Sect.  8.  Other  objections  !  Want  of  suitable  conductors — Banks  regu- 
lating themselves — Corrupt  influence.  .....  94 

CONCLUSION.   .........     98 

Appendix 201 


•     • 


••   v\ 


V\ 


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